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Mindset of Startup Entrepreneurs vs. Those More Experienced: A Dallas Business Attorney’s Perspective

Dallas business law attorney, Richard “Ric” Armstrong, compares the way an experienced entrepreneur views legal risks versus first-time entrepreneurs, and what the latter can learn from the former.

Startup companies abound these days, and many of them bring some fantastic and innovative ideas to light. However, first-time entrepreneurs can make legal mistakes that can jeopardize their company’s future. Conversely, seasoned entrepreneurs are more aware of legal risks, and change their business practices accordingly. Let’s compare the two and see what we can learn.

Experienced entrepreneurs start by considering the break-up

Rookie startup entrepreneurs are often driven by an idea. But they forget what they’re really starting is a company. And given that, they start creating the product, before they’ve done the work to establish the company. Experienced entrepreneurs start by thinking about the business. From the outset, they want to formalize the company structure: They want to know who has controlling interest, and will they elect “S” or “C” corporate status, or even be certified as a “B” Corp. They want to how to resolve disputes, how they’ll deal with investors who want to buy in or leave; and what happens to their Big Idea if there’s a disputeand an owner wants to walk away.

Experienced entrepreneurs are slower to take on investors.

First-time startups usually prioritize operating capital above all else. And because of this, they are eager to welcome any investors. However, a more experienced entrepreneur understands that with every investor comes more restrictions, more financial obligations and more potential legal entanglements. Taking on early investors can deter later investors from coming on board. Some times, an alternate source of financing (such as a bank loan) may seem expensive at the time, but down the road, it could be a much less costly decision.

Rookie entrepreneurs ask for forgiveness instead of for permission.

Startups frequently live by another overused saying: “It’s better to ask for forgiveness than permission.” However, that’s a true rookie mistake; a shortcut you took can come back to bite you. Big or small—from an ignored regulatory filing to employees who are illegally asked to skip their lunch period (during an 18-hour day)—it’s always much more expensive to fix a mistake than it is to prevent it from happening. More experienced players ask for permission, and do it right the first time. Their counsel is involved in every major decision, policy and contract, to make sure the company is legally covered and the owners’ rights protected.

Rookie entrepreneurs rely on handshakes, DIY contracts and don’t hire lawyers.

Rookie entrepreneurs see lawyers as obstructionists and a cost, so they rely on handshakes to start a working relationship. If pressed, they economize with DIY boilerplate contracts. The experienced entrepreneur knows that a boilerplate contract puts the company at a disadvantage when it comes to contracts, because the firm is less able to customize terms.

Experienced entrepreneurs realize that attorneys aren’t obstructionists, but facilitators. They know how to structure a deal to someone’s advantage, from fulfilling contractual obligations to avoiding unnecessary taxes and negotiating better terms in the first place.

If you are a startup entrepreneur, the time to consult a Dallas business law attorney is before trouble happens, not after. For an appointment, call Armstrong The Law Firm, P.C., today at 972-424-L-A-W-S (5297).

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Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297