By Janelle M. Lewis, Principal Attorney, The Law Office of Janelle M. Lewis

Business planning is essential to developing any business. Whether it be 20 pages or on a napkin, it is understood and accepted that it is an imperative tool in business development. Business planning is not only essential from moving a  business idea into a full-fledged business, but it is a guide to stakeholders and investors to show (or in some cases convince) that the business will succeed.

I don’t need to convince readers the importance of business planning – nor is it my intention to do so in this blog post. What I want to do is introduce the term legal planning, redefine it, and explain why it is important for startup and SME entrepreneurs to invest their time planning for the legal needs and liabilities of their business endeavors.

How is legal planning generally viewed

Legal planning is generally viewed as drafting a legal strategy for those who lack either the mental capacity or legal capacity (or both) to make legal decisions on their own behalf.

How I define legal planning and what it is important for entrepreneurs

While few see it as a tool to service the needs of a business, I do. I define Legal planning as the means of anticipating the legal needs of your business endeavors from the onset. As opposed to business planning that seeks to make a plan for success – legal planning seeks to avoid (or at least anticipate) legal problems that could hinder your success. It also provides a blueprint of your legal rights and responsibilities as your business expands from an idea to a reality. This is especially true of businesses that desire or are currently pursuing international expansion.

Ignorance of the law is no excuse…and is costly

In most jurisdictions around the world (and I would venture to say in all) ignorance of the law is not an excuse. Building a product or developing a service that violates the laws or regulations of any jurisdiction comes with consequences. Those consequences can not only be legally devastating but economically and financially as well. Imagine spending hundreds of hours developing a product, only to find out that use of that product violates the law. Not only are you looking at a loss of investment (of both time and money) – you are also looking a the cost of legal fees to defend your company…and possibly yourself.

Besides the potential to violate the law, there is the potential to violate the property rights of others. This is predominately seen in the area of Intellectual Property. Imagine all the hours you spend to build your business’ brand, only to find out it infringes on someone else’s trademark, copyright, or patent rights, and thus you can no longer use it. Imagine building a large following based on this brand that you can no longer use. Remember, when people make connections between two things, it is often very hard to break that connection – can you trust that your product or service will survive when you have to re-brand it? Do you want to roll the dice that your customers will remain loyal when your competitor, whose trademark you infringed upon, can continue to market to your customer base?  And what about trade secrets? Are you protecting them? Or can your employees take it with them when they leave your company and use it to their benefit? Do you know what your trade secrets are? Did you know that it can include your customer list?

When the honeymoon phase ends…

Another area in which legal planning proves useful (and is often forgotten) is when forming business partnerships. Just like the beginning of a marriage, there is a honeymoon phase in the beginning of a business partnership, where everything seems great and nothing can go wrong…until it does. And when it does, the question of who is entitled to what, who invented what, and who owns what can become real sticking points -especially when nothing is memorialized in writing. If you thought that a romantic break-up was bad, how about a one that could potentially involve hundreds of thousands of dollars, euros, yen…or more.

So why am I talking about this?

I am not simply writing this blog article to bring fear to the hearts of entrepreneurs (although if some of my examples apply to you, you should be afraid), but to highlight the importance of legal planning in business development and why it should be something worth investing in before it becomes too late.

To that end, I will be writing a series of blog posts on specific areas of legal planning that will hopefully alleviate some of the fear – and provide an important blueprint to entrepreneurs to build successfully and not worry needlessly.

The views expressed in this article do not constitute legal advice and legal information provided in this post should not be relied upon as legal advice. Please contact an Attorney for advice on your specific matter.