Turning any business idea into a real enterprise is called a startup. But, during the process, the startup owner might get lost in dealing with the competition and achieving high growth. As there are many things that should be kept in mind before starting a startup, however, if one does not pay attention to the legal aspects, it can be an obstacle in the way because no startup owner may want to handle any legal consequences. In this article, we are going to discuss some important tips that can be used by startups to avoid any litigation issues.
4 Important Tips for Startups to Avoid any Litigation
If you are running a small business, it is common that your attention can be divided into many things, and may forget small details that can be more important i.e. legal practices. In order to avoid any lawful issues, and ensure streamlined operations, you can follow these 4 important legal tips for your startup.
1. Employee Termination
Business owners have the right to recruit and terminate employees, but in a business where any unexpected things could happen, you should properly manage every organizational process such as employee resignation. Here we have mentioned some points that you should consider in the employment terms of your selected candidates:
- Employees are responsible to notify the organization about their resignation.
- It should be mandatory for employees to serve a notice period after their resignation. The notice period should depend on the terms of the agreement between the employee and employer.
- You should take legal action against that particular employee who does not serve the notice period, and also, the relieving letter should not be shared with that particular employee.
- Employee termination should be entirely dependent on the terms that the employee and employer have agreed on.
- In case of lay-off, it should be compulsory for the enterprise to give 8 day notice period before terminating employees. This type of termination should be obtained from the Government. Therefore, you can proceed with the layoff only after taking permission from the government.
By implementing this advice into your policies, you can also reduce the chances of employee absconding.
2. Non-Compete or Non-Solicitation Clauses
When you are running a startup, it is almost impossible to be completely shielded from the competition. Still, you can improve your defenses by implementing these legitimate tips into the clauses of the employment documents:
- After the termination, the employee can not work with competitor companies for a set duration.
- The employee can not start his/her own enterprise that provides the same services as their last company.
- In case if the organization places any employee in the client company, after resignation from the parent company, they cannot work with that client. If they disobey, then you can take legal action against that employee.
This will result in reduced employee turnover and also protects the investment that is put into the employees.
3. NDA: Non-Disclosure Agreement
If you want to avoid any legal issues, you can not afford to avoid a non-disclosure agreement. Always ensure that your business information is secured within the organization. There is a big difference between the disclosure of an idea and a business strategy. We know that ideas are abstract, still, the execution of that idea can make a difference in the failure or success of the business. Sharing these data without the owner’s consent can create many problems and can be directly declared a crime. According to a survey by Haystax, 40% of respondents have stated that the most damaging threat vector faced by their business is malicious insiders. NDA can help businesses to reduce the leakage of confidential data. This agreement ensures that no employee can reveal any confidential information to any third party. There are a few tips that you should remember if your employees have signed the non-disclosure agreement:
- You should maintain a record of the ones who have accessed your confidential data.
- Employees cannot copy or record sensitive information related to the business. If any employee shares this data with a third party, the company can take legal action against that particular employee or demand compensation from the same.
- Even after the employee leaves the organization, the NDA will be valid.
Drafting NDA comes with less cost, and it shows employees that the information you are sharing with them has commercial value.
4. Prevent Forgery
You should know that forgery is an offensive crime. Startups or any small businesses can not afford to get caught up in forgery and fraud. To prevent these types of issues, here are some legal tips that can help your business:
- You can distribute work duties to different employees for financial purposes.
- Periodically audit every protocol and process and analyze the reliability of the vendor list.
- In the case of recruitment, background checks of candidates must be done.
- You can reduce criminal risks by working with insurance companies and increasing anti-fraud measures.
- If any employee chooses to make fake documents without authorization from the company, he/she can be charged with severe criminal charges and the punishment of up to 3 years of imprisonment.
The above discussed are some legal tips that can help your startup to operate within the boundaries of the law. You should remember that a successful enterprise always tries to change what is wrong and follows the right thing. If your startup requires some help regarding legitimate matters, you should consult law firms and seek advice from a trusted legal advisor.