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Protecting Your Startup From Liability

Creating a limited liability company or a corporation is an important first step in protecting your startup company from liability. If you stop there, however, you may not be so protected as you think.

A corporate entity is a shield that protects your personal assets from creditors and lawsuits associated with your business. Unfortunately, if you are sued, a litigator will look for ways to assert that your entity is a sham or wasn’t properly constituted.  To receive the maximum protection, seek the help of an experienced attorney to establish, maintain and document your entity.

Secondly, you need to set up your legal relationships to maximize the protection of your corporate shield.  Having an LLC or corporation will do you no good if you enter into contracts and agreements using your personal name. 

Having the right insurance policies in place

Properly constituted, an LLC or corporation can shield your personal assets from contractual liabilities as well as lawsuits arising from negligence. However, even a corporate entity needs insurance. You should find an insurance broker who is accustomed to dealing with your specific type of business to ensure you have the right coverages in place.  A technology startup does not face the same liabilities as a pharmaceutical company, so you will need the right coverage for your venture.

Protecting your intellectual property

Finally, it’s important to protect your company’s propriety information. Academics often want to publish as soon as possible to scoop others. Unfortunately, once you disclose your propriety information by publishing it, your information is in the public domain. As least 60 days prior to publishing your proprietary information, meet with patent counsel and file a preliminary patent application.  In this way you can protect your valuable ideas from the risk of loss.

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