The most common legal mistakes when starting your business
Many entrepreneurs start their business full of enthusiasm. In that early phase, legal choices can have major consequences later. This is not due to unwillingness, but often because the initial focus is on clients and day-to-day operations. In this article, I discuss five common legal points for entrepreneurs starting a business in the Netherlands.
Point 1: Starting without suitable general terms and conditions, or not using them correctly
Many new businesses operate without general terms and conditions, use a generic template that does not properly match their services, or have general terms and conditions drafted by AI.
Your general terms and conditions set the rules for working with your clients. For example, they record arrangements concerning payment, liability, intellectual property, and disputes. If arrangements are not properly recorded, this can cause major problems later.
It is also important to use your general terms and conditions correctly. If you do not, there is a risk that they will not apply to the agreement.
What can you do? Have your general terms and conditions drafted or reviewed and obtain advice on how to use them correctly. This ensures that they match your services and sector.
Point 2: Verbal arrangements with clients and suppliers
"We discussed it verbally." That can cause problems if the parties later remember different arrangements. Particularly for larger assignments or long-term collaborations, it is sensible to record arrangements in writing.
Important subjects such as liability are not always discussed in practice either. This can create unnecessary risks.
What can you do? Have an agreement or engagement confirmation prepared in which the key arrangements and risks are recorded. In addition, always confirm the arrangements made in writing, for example by email.
Point 3: Having no privacy notice on your website
Many new entrepreneurs do not realise that the General Data Protection Regulation (GDPR, known in Dutch as the AVG) also applies to their business. As soon as you process personal data, you must comply with privacy rules.
You must clearly inform the people concerned about what you do with their personal data. For many websites, an easily accessible privacy notice is an important part of doing so.
GDPR infringements can lead to regulatory action and sanctions. Apart from that, it is important that clients know what happens to their data.
What can you do? Have someone assess which privacy rules and documents matter to your business, such as a privacy notice or record of processing activities.
Point 4: Choosing or retaining the wrong legal form
Many entrepreneurs start as a sole trader because this is straightforward. That can be a good choice, but a sole proprietorship also has disadvantages. As a sole trader, you are in principle personally liable for the debts of your business.
A Dutch private limited company (besloten vennootschap, BV) is a legal entity. Its business and private assets are therefore separate in principle. The tax and administrative consequences, however, differ according to the circumstances.
The legal form that suits you best depends on factors including your activities, risks, profit, and plans for the future.
What can you do? Discuss your situation with legal and tax advisers before choosing a legal form. Even if your business already exists, it may be sensible to reconsider its legal form.
Point 5: Seeking legal advice too late
Many entrepreneurs only engage a legal adviser once a problem has already arisen. At that point, the available options may be more limited and the costs may be higher.
By obtaining advice in advance, you can consider legal issues before making a decision or signing an agreement.
For example, you may have the lease for your business premises reviewed, have a collaboration agreement drafted, or have another type of contract reviewed before signing it.
What can you do? Obtain legal advice before making important arrangements or signing agreements. This gives you clarity in advance.
How can you avoid these mistakes?
Timely attention can limit many of these risks. Clear arrangements, suitable legal documents, and timely advice help you start your business on a sound legal basis.
Do you have a question about any of these points, or would you like to know what I can do for you?
Please get in touch for a no-obligation introductory meeting. I will be happy to look at your specific situation with you.