Both professionals and entrepreneurs should operate with at least a basic understanding of contract law, as they will be forming or agreeing to contracts with at least one of the following parties:
Different types of contracts will require different considerations and areas of focus, however it is always well worth considering whether a contract:
- Is presented in a manner (or contains clauses) that render it unenforceable
- Prevents you from working with other people (e.g. through nonsolicitation or noncompete clauses)
- Prevents you from doing independent work on the side
- Locks you in to an obligation for a longer period than desired
- Has specific terms laid out for early termination
- Has specific penalties associated with violating the contract
- Lays claim to your intellectual property (in a manner that you consider to be unreasonable)
- Adequately outlines incentive packages or special benefits
- Adequately allots for coverage of relevant expenses (and defines which expenses are relevant, if necessary)
- Prevents you from sharing or talking about certain things (e.g. via confidentiality or nondisclosure clauses)
- Includes specific requirements (e.g. to be present in an office during certain hours of a business day) that would alter your present way of working
- Specifies which state, region, or country's laws govern it and where related disputes would go to court (via choice of law and choice of forum clauses)
- Outlines dispute resolution in a manner that enables you to work with a mediator rather than go to court (which could save a lot of money)
Most typical contract stipulations laying out your responsibilities and where legal proceedings will take place should things go sour are fine as is (it just helps to be aware of what these stipulations are). The important thing is that you look out for clauses that interfere with your professional and personal plans and adequately address them with your employer before signing in the dotted line.
- The American Bar Association's Guide to Contract Law (offers 15 helpful chapters on various facets of contract law)
- FindLaw's articles on contract law (framed in somewhat of an FAQ format, which may help you address more specific issues and scenarios)
- A definition and overview of contract law by the Cornell University Law School (should you want the gist in just one page)
- The Library of Congress' Beginner's Guide to Contract Law (rife with helpful book references)
- The Contracts Guy (a blog devoted to informative posts about contracts and contract law)
Incorporating as a Business
The biggest factors to consider with regard to incorporation are:
- The manner in which you like to run your business
- Whether the business is a solo or joint venture
- Who maintains ownership
- Whether or not you intend to sell your business
- How large you expect your business to become
- How much you expect your business to earn (in the short and long run)
With these details in mind, you will be better equipped to choose a business structure that suits your needs.
We recommend utilizing the Small Business Administration as a resource should you not know where to start; they have overviews of all the major types of business structures under which one can incorporate:
- A Sole Proprietorship
- A Limited Liability Company
- A Cooperative
- A C Corporation
- An S Corporation
- A Partnership
The Small Business Administration also provides advice on choosing your business name and registering with the country and your state, obtaining licenses and permits, and paying taxes.
Adhering to Laws and Regulations Associated with Running a Business
Should you become an entrepreneur, sell products or services, and eventually hire employees, you will need to make yourself aware of the various laws and regulations to which you must adhere.
Because the regulations that affect you will vary significantly depending on your work, we won't make any specific recommendations. Instead, we'll share our favorite resources with you:
- elaws Advisors, a resource offered by the United States Department of Labor, which is designed to help small business owners gain a better understanding of federal employment laws
- The Small Business Administration's introduction to advertising and marketing law
- The Small Business Administration's introduction to employment and labor law
- The Small Business Administration's introduction to finance law
- The Small Business Administration's introduction to intellectual property law
- The Small Business Administration's introduction to online business law
- The Small Business Administration's introduction to privacy law
- The Small Business Administration's introduction to environmental regulations
- The Small Business Administration's introduction to the regulation of financial contracts
- The Small Business Administration's introduction to workplace safety and health law
- The Small Business Administration's introduction to advertising and marketing law
Intellectual Property: Trademarks, Patents, and Copyright
We have received very mixed reviews from professionals and entrepreneurs about these intellectual property. Some love trademarks, patents, and copyright- they love registering their work and defending it against infringers. Others see them as a waste of time and money that could otherwise go toward keeping ahead of the curve.
Trademarks, patents, and copyrights will not act as a perfect shield protecting you from competition. Though registering your work may help with some issues, it takes a lot of work (not to mention money) to punish infringers. What's more, there are many ways companies can work around patents, copyright, and trademarks to emulate your work without breaking the law.
Generally speaking, the best practices with intellectual property appear to involve:
- Avoiding others' IP (do not infringe others' trademark, patents, or copyright)
- Constantly creating new, innovative, truly original work (and not resting on your laurels)
- Incorporating your business if you're funding it independently (to reduce your personal liability)
- Having an broad IP policy (addressing what you do to protect your work) that can be succinctly and eloquently explained to investors
Trademark infringement does not involve having the same name as someone else, but rather having a name in which there is "likelihood of confusion." This means that you might get into trouble with trademark law, even if you have a unique name, just so long as reasonable consumers might confuse it with the name of one of your competitors. That said, you can have the same name as a trademarked company so long as you do/provide/sell entirely different things and could not be mistakenly seen as representing that organization.
Before choosing a name for a product or service, run searches on Google and USPTO.gov. Only bother registering names in which you have invested significant resources. Though you can certainly register names independently online, consider having an experienced lawyer apply for federal registration on your behalf, which will cost around $1,000 to $2,000, but can save you a great deal of hassle.
Obtain an "actual use" trademark if you are ready to sell products or services immediately; get an "intent to use" trademark that can be renewed every six months if the name is not ready to go live. Don't worry too much about the visual aspect of a brand name (it is likely to change); the name is what matters most.
Should you go through the trouble to trademark something, you must also be willing to go after those who violate that trademark, as well as actively distinguish your product. Should you fail to defend your trademark, your name may suffer from generocide (the name becoming a generic term). This happened to Aspirin and Escalator, it can happen with your trademarked name, too.
A patent gives you a limited monopoly that prevents others from using your invention. There are two types of patents: utility patents and design patents.
- Design patents protect how things look, not how things work
- Utility patents protect how things work (e.g. a process or method), not how they look
Most businesses use patents more as assets (e.g. when signing deals or preparing to sell) rather than excuses to enter litigation.
Whether you choose to patent your work or not, avoid knowingly using others' patented material (we say "knowingly" because it's not always easy to tell if a certain type of process you developed is already patented). If you do find potentially-patented processes similar to your own, speak to a lawyer. Some tech-oriented law firms (especially in cities like San Francisco) will offer startup packages in which they forgive certain legal fees if you do not raise a million dollars in the first year.
Should someone sue you over patent infringement, one of these three likely scenarios will play out:
- The company ceases contact when you call it on patent trolling (which has become increasingly common) in a sternly-written letter (ideally issued by your lawyer)
- The company demands nominal payment, which you issue just to make them go away
- The company wants more money than you can afford (in this case, you would need to work out a strategy with a lawyer and decide whether or not to take this to court, shut down your business, or pursue some other alternative)
Though most people online associate copyright with things like books and images, copyright also protects source code, user manuals, and compilations of code. Though it is automatically applied to your work, you cannot enforce your copyright without registering the content in question with the United States Copyright Office.
Keep in mind that copyright will not prevent other people from reverse-engineering your work or developing something very similar. We recommend devoting your time to the creation of new, fresh work rather than the pursuit and punishment of those who copy previously-published materials.
We do not recommend using others' copyrighted material, even using a Fair Use argument. Most companies see any use of their copyrighted material to be a violation and don't consider Fair Use to be a valid excuse, plus the burden of proof will be on you. What's more, we have been informed by a couple of lawyers that Fair Use cases tend to turn out in favor of content creators, rather than users. Should you wish to use copyrighted material, get permission.
For more guidance on presenting and using work online, see our guides to protecting and defending your content from theft, properly using and citing Creative Commons photos, applying creative commons licenses to your own work, and sending DMCA complaints.
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