Startup Law 101 Series – What every entrepreneur should know about business law?
The Startup Law 101 Series is aimed at educating founders and entrepreneurs about the basics of startup business law. The question is – what should every entrepreneur know about business law?
Here are my suggestions on this important question.
1. Law is fundamentally a specialty field and entrepreneurs should leave it, for the most part, to the specialists when it comes to technical details.
This part can’t be emphasized enough. Law is a maze of complexities. If you, as an entrepreneur, try to master it at that level, you will be an unusual entrepreneur if you are not quickly discouraged into abandoning the effort altogether.
2. Entrepreneurs can feel trapped, though, by specialists who hem them in and sometimes abuse them. Lawyers have been known to attempt to capitalize on the “fear, uncertainty, and doubt” (FUD) factor that can be used to scare up business where none legitimately exists. So it can be unsafe to leave everything to the specialists without being informed about their proper role and without being proactive in managing their activities as your hired agents.
3. Entrepreneurs should attempt to gain a working knowledge of the law as it affects their companies. The emphasis here is on “working.” This is not a technical knowledge. This is not about going to law school or about learning to think like a lawyer. It is about trying to get the equivalent know-how about law that a serial entrepreneur might have – it is about knowing the decision points and the main factors that affect those decisions so that you can manage a lawyer’s efforts in giving you technical assistance on those points. It is about learning the fundamentals of how companies are formed, funded, managed, and sold. It is about understanding how deals work within a company context. As an entrepreneur, you don’t have to know how these things work beyond following the advice of your lawyers. But you will be far sharper if you do. You can be led by the professionals or you can actively manage their efforts, even while using their expertise, to help achieve your goals.
4. Therefore, though law is fundamentally boring for most entrepreneurs, the smart ones attempt to educate themselves in this area as needed to achieve the goal of being effectively proactive in working with lawyers and of being able to use the law effectively to further their business goals.
5. What does this investment of time and effort get you? It will educate you on how to use the law to help protect yourself from liability risks relating to your business. It will improve your ability to plan effectively for your company’s launch and growth. Finally, it will save you money because it will improve your ability to manage the time of your lawyers.
6. How do you gain this knowledge? That is up to you. I emphasize here only that you should not disdain the task just because it involves law. Nor should you overdo it in the other direction by diving into specialty forms of knowledge. Strike a balance. Invest the time needed to understand business law at a high level, with a strategic and not a technical focus. Use this author’s Startup Law 101 Series to learn the fundamentals of startup law. Read significant blogs in the area (the Startup Company Lawyer and The Startup Lawyer are good ones). Read the posts. Think about the issues. Get the larger perspective on how legal issues affect you and your company.
You can also use self-help resources from the publishers who specialize in such works. These can be helpful for learning about general legal issues affecting business, though they are less helpful for startup issues specifically.
In the end, experience will be your best teacher. But you will need to give yourself a foundational knowledge to ensure that you learn the most from your experiences. And, above all, make sure to work with a business lawyer who works with you and educates you about the legal steps you are taking. Do watch out for lawyers who keep you in the dark and who merely spread the FUD factor.
Remember, don’t be discouraged if you cannot understand legal technicalities. Your goal is not to master technicalities. It is to get a working knowledge. Place a high value on anything that gives you that perspective. This is what the serial entrepreneur has mastered. It is what you will need to master as well if you are to be optimally effective as an entrepreneur in managing legal matters to further your business goals.