When you were a kid, did you ever get so excited about a new toy that you rushed to put it together, tossing the instructions to the side? If you then realized you missed a few steps, it probably became infinitely less fun.

That’s what it’s like for startup founders who forgo proper legal standards in the rush to get their product or service to market — only a lot more is at stake. When correctly implemented, the law will help you protect your business and the people who helped build it. As a founder, you will be making legal decisions as you build your startup and throughout its lifespan.

TechRepublic Premium presents some ideas if you want to stay on the right side of the law as a startup founder. Don’t think of these as best practices, but as concepts you need to discuss and explore. The article includes advice from Nelson Chu, CEO and founder of Percent.

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  Incorporating: Making the right choice

  Each business will have different legal needs. This article is not intended to be a catch-all for every business in every industry. Be sure to look into location-specific and industry-specific legislation and regulations that may affect your business. With that being said, some general issues can be considered by most startup companies.

  When founders set out to establish their business, one of the most confusing questions can be whether to choose an LLC or corporation for the business structure.

  Chu has this advice, “If you are going to be raising money from investors, you have to go with a corporation, even if the taxes and filing process is more onerous. They will not invest in an LLC as it requires a share structure instead of a membership interest ownership structure. If you are aiming to run this as a sole owner or one with very few owners that will never raise outside capital, an LLC is fine. LLCs are quicker to set up and easier to manage but lack a lot of the scalability capabilities of a corporation as it’s much more difficult to grant ownership to employees as the company grows as it requires a buying into its membership interests which comes with its own set of tax liabilities. A corporation’s share structures prevent much of that especially when stock is granted in the form of options.”

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TIME SAVED: Crafting this content required 16 hours of dedicated writing, editing, and research.