What every founder should know about the law

Richard Malm, Rick Malm, Dickinson Law Firm, Iowa Start-up Group, Des Moines Iowa,

Posted on 11/03/2017 at 12:00 AM by Richard Malm

“Build a better mousetrap” as the saying goes, “and the world will beat a path to your door.”  As a recipe for success, if it was ever so, this advice is certainly insufficient guidance for today’s entrepreneur seeking to thrive in a global economy.  However, the idea of a better mousetrap remains a powerful metaphor for the motivating idea that should be behind every start-up.

So you know what your “mousetrap” is, but what else do you need to know, and do, to succeed?  The total list may seem endless as you consider the unique opportunities and threats to your mousetrap enterprise, but from a lawyer’s perspective, a very few basic things are important from the beginning of most every enterprise:

  • What form of entity should “Mousetrap & Company” adopt?  The first imperative is usually to establish “limited liability” so that your personal assets outside the business are not automatically at risk.  This means you will probably want to form either a corporation or a limited liability company.  After that, the choice becomes largely a matter of tax and control considerations, which you will want to review with your counsel of choice.

  • What must you do to be legally compliant as you build your workforce?  As you hire, employer obligations follow and can quite literally “mousetrap” the unwary.  Tax withholding, wage & hour law compliance, workers compensation insurance requirements, and work place safety are just a few of the things you want to be sure that you properly cover. Here again, counsel can help.

  • What do you need to do to get funded? Even if your mousetrap is not just better, but the best, you must be properly funded to beat the inferior mousetraps out there.  Most start-ups will need to borrow money, sell equity, or both, early in their life cycles. If you are selling, or planning to sell equity interests, you need to know that offering securities is heavily regulated by both federal and state law. This is an area that is demands a basic understanding of the rules and specific legal counsel before you begin.

  • What can you do to “own” your part of the “mousetrap” space? The classic answer to this question is to file for a patent, but don’t forget the power of a well-chosen brand protected by a trademark. If you hire someone to design your trap, to create your logo, or to code your software, make sure you own the rights. Make sure someone else’s patent, mark, or copyright does not block you. Know the basic rules of intellectual property and get good specific IP advice up front and along the way.

  • What regulatory and legal domains govern mousetrapping?  Do safety or other regulations apply?  What about product liability? Environmental impact?  What rights do the mice have?  Whatever your business, it is quite likely that local, state, and federal laws and regulations are going to impact it.  Make sure you know the rules before you play the game. 

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If you have questions about your start-up’s legal compliance, please contact the Dickinson Law Firm at (515) 244-2600 to speak with an experienced attorney.

This material is not intended, nor should it be construed or relied upon, as legal advice.  Please consult with an attorney if specific legal information is needed.

- Richard Malm

Categories: Start-Up Group, Rick Malm


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