How Startup Founders Can Reduce Risk -- and Stay Sane

Question: As a startup founder, what risks and personal liabilities do I need to be aware of -- and how can I safeguard myself?

Question by: Matt

Build a Portfolio of Proof

"People will lead you on, steal your ideas, and ride you for free. The best way to safeguard yourself from this is to build a portfolio of proof, proof that you can excel at getting the job done with great results. Have a solid number of case studies and testimonials that you can point to so that you'll never have to waste your time and resources."


Don't Forget Your Family

"Your family is going to go through your startup with you. Especially as a first-time entrepreneur, the effects of uncertainty and stress, and all the other ups and downs will be shared by the people closest to you, so make sure you're aware of that. Over communicate and be honest along the way -- it will be hard enough without trying to hide the craziness from those who care about you."

Never Turn Your Back on the Numbers

"Finances are the spirit of a business because even if the business entity fails, debt lives on -- and few things can weigh you down more. From day one, manage your dollars and cents with an extreme attention to detail. A good accountant is worth every penny. Whether it's your own money or investors', be sure you can always show where every penny has come from and gone."

- Kent Healy | Founder and CEO, The Uncommon Life

How's Your Health?

"As a startup founder, you won't spend hours each day at the gym. In fact, you'll spend more time in front of your computer than anything else, and your health will likely suffer. Make sure as an entrepreneur that you find enough balance to keep a healthy body, which leads to a healthy mind that's able to conquer all the challenges you will face as you develop your business."

- Danny Wong | Co-Founder, Advisor and Lead Evangelist, Blank Label
Don't Rely on a Handshake

"Never make a deal on just a handshake. Even if you're dealing with family or close friends, put together at least a minimal letter of intent to outline what is expected out of each person or company involved in the deal. It's not a sign of distrust, but a sign of professionalism every entrepreneur needs to have. It shows commitment from each party, and increases the odds of success."

- Ilya Pozin | Founder and CEO, Open Me
Watch Your Threads

"Email records can be used in lawsuits, and it is essential that all correspondence you have via email is professional and on the record. Always assume that any email you send can be scrutinized and used in court."

- Zach Cutler | Founder and CEO, Cutler Group

Contact a Business Attorney, Just In Case

"Your risk of personal liability varies depending on the type of business you are starting. If your business has very little risk, you may decide it is not worth the financial and time investment to incorporate. However, you should speak with a business attorney to make sure you fully understand the costs and benefits -- including the potential tax savings -- of forming a legal entity."

- Doug Bend | Founder/Small Business & Startup Attorney, Bend Law Group, PC

Think Through Your Taxes

"Every business is taxed differently -- before you get started, you need to be aware of what the government expects from your business activity. Safeguard yourself with extra due diligence and by consulting a professional. You do not want to figure out your tax liability after the fact."

- Lucas Sommer | Founder CEO, Audimated

Don't Burn Out

"Workaholism is a double-edged sword. It’s great to get a lot done, but it's unsustainable. The safeguard for this is balance, and in my experience exercise."


Consult a Lawyer First

"It is impossible to know what liability is most important without knowing more about you and your startup. The first step should be contacting a lawyer and discussing your situation and how you can protect yourself. Ask for a flat fee and let the lawyer know you are a startup, and you can likely get this done without breaking the bank."

The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world's most promising young entrepreneurs. The YEC recently published #FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good), a book of 30+ proven solutions to help end youth unemployment.

About YEC

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

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