As an entrepreneur, building an app is exciting as it brings to reality the products of your imagination. However, the excitement should not cloud the fact that legal issues are an essential consideration during app development. Small businesses need to consider various legal requirements to protect their business interests and prevent potential legal problems down the line.
App development can seem like an intricate process, and several difficult legal issues can pose a challenge for new startups. App ownership, license and distribution agreements, trademarks, intellectual property, and international laws are some of the common legal issues small business owners need to consider during app development to ensure their commercial interests are safeguarded. Ignoring the legal considerations can derail the process and harm startup progress. This article outlines the top legal pitfalls small businesses need to consider during app development.
Top 5 Legal Requirements to Consider When Creating an App
The following are the top five legal requirements that startups need to consider during app development:
- App ownership: Identify who owns the app and who will be accountable in case of legal challenges.
- License and Distribution Agreements: Ensure all agreements with third parties and suppliers, and agreements necessary for operation, include clear terms and conditions that protect ownership interests, preserve distribution rights, and prevent unauthorized use.
- Trademarks: A trademark is the foundation of every brand and should be protected from theft by registering it with the United States Patent and Trademark Office (USPTO). A trademark, which can include product names, logos, and companies, helps customers identify and distinguish your products from competitors.
- Intellectual Property: App development involves critical intellectual property consequences, so it is critical to protect any ideas and software code developed during the app development process. Taking steps to secure copyright protection and filing patent applications can help prevent intellectual property pitfalls.
- International Laws: While an app can be based in one country, it can be downloaded and used around the world, necessitating considerations such as data protection regulations, intellectual property laws, and compliance with foreign consumer protection laws.
Ensuring compliance with operator’s agreements, confidentiality agreements, and avoiding intellectual property infringement claims are also crucial for successful app development. Legal assistance should be sought for complex issues, such as applying for a trademark or compliance with international laws.
The app development process is an adventure for most tech entrepreneurs, but it comes with its fair share of risks. Legal issues can pose significant challenges to startups seeking to balance funding and other logistics. As such, below are common startup legal issues to consider from day one
Common Mistakes Made by Startups While Dealing with Legal Issues
Legal issues can be complex. As such, many startups make mistakes that can have significant legal consequences. Some of the common mistakes include:
- Business Structure: Incorporation as an LLC or corporation is essential for achieving legal separation between the business and the individual and mitigating personal liability.
- Startup Financing: Funding is essential for startup success, and while loans and angel investors are some of the traditional options, entrepreneurs can also bootstrap to save money.
- Legal Documents: Customized legal documents drafted by attorneys have become common-place in financial and legal circles for a good reason. They serve as vital assets to startups, protecting them from legal pitfalls, and creating value for the team and brand.
- Hiring Practices: Hiring is a fundamental process for any startup, and it is vital to understand the diversity and discrimination laws that guide the process. It is equally essential to have employment agreements and invention assignment agreements that protect confidential information and intellectual property rights.
Avoiding these mistakes can help startups minimize legal risks and increase their chances of startup success. Accessible legal options, such as customization legal forms and customizable templates, provide affordable options for startups to get legal assistance.
Insurance and Legal Paperwork
Legal paperwork and insurance policies are crucial to startup success and should never be overlooked. Consider the following essential insurance policies during the app development process:
- General Liability: This protects business interests from legal consequences caused by the business’s operation.
- Worker’s Compensation: This provides insurance coverage for employees in case of work-related injury or illness.
- Errors and Omissions (E&O): This provides coverage against service errors, complementing general liability.
- Cyber Liability: As more businesses move online, this policy safeguards against data breaches and cyber-attacks.
- Key Person Insurance: This provides insurance protection for startup team members that provide significant value to startup operations.
- Employment Practices Liability Insurance: This policy provides insurance coverage for employment-related claims such as wrongful termination, harassment, and discrimination.
Customized legal documents drafted by an attorney should also supplement general liability insurance to protect startup interests. Services like RocketLawyer or Lawbite provide affordable options for acquiring legal advice, allowing startups to access experienced legal practitioners without the typical exorbitant fees.
Top 6 Legal Issues to Consider from Day 1
Startup success hinges on focusing on the significant legal issues from the start. Addressing these issues from the beginning ensures effective strategies to position startups for long-term success. The top six legal issues startups should consider from day one include:
- Business Structure: Choose a business structure that aligns with startup goals and provides optimal legal protection.
- Founders/Shareholders Agreement: This outlines the roles, responsibilities, and rights of co-founders, outlines control of the company, and provides a framework for decisions and termination.
- Employees: Comply with all employment laws and regulations, have well-crafted job descriptions and employee handbooks, and clearly outline employee expectations.
- Contracts: Ensure all contracts conform to specific legal requirements, clearly outlining the terms of a deal.
- Shares and Equity: Take a cautious approach in stock issuance when dealing with investors to prevent running afoul of securities laws.
- Intellectual Property: Address patents, copyrights, legal forms, trademarks, registration for all components acquired during app development from the onset to prevent potential legal disputes.
By considering these legal issues from day one, startups create the necessary foundation for long-term success.