Rocco E. Cozza • November 12, 2019

Best Legal Tips When Starting A Business

Starting a business can be an exhilarating affair. You’re finally putting your dreams to work and bringing them to reality, one step at a time.

The journey can also be daunting. Especially when there’s still a lot to do before the business can stand on its own feet. You have funding issues. You need to find and hire staff, get ideal office space and deal with a host of other issues.

But in all this doing, many forget that some of the most important things to take care of first in starting a business are the legal issues. Sadly, with 22.5% of businesses failing within the first year and a further 50% fail after four years, most never get a chance to correct this error until it’s too late.

According to a survey conducted by CB Insights, where they conducted a post-mortem on 101 failed startups, 8% of businesses failed because the founders did not appreciate the potential legal challenges they would face.

Although your startup idea may seem simple enough, the truth is it can enter a world of legal complexities that will ultimately shut it down. If you’re to give your business a fighting chance, you will need to pay attention to these tips for giving your startup a solid legal foundation.

#1: Work with a professional startup team

Every startup needs a mix of skills and professionals that will help nurture and position it for growth. When starting a business, that’s to be expected, since startup founders cannot possibly know everything. In fact, more than a third of founders have only a high-school diploma and just 9% have a degree in business.

Unfortunately, in a misguided effort to save on expenses, startups often try to figure it all out on their own or hire friends and family that will work at steep discounts.

If you’re doing this or thinking about it, stop right now. Going down that route will only starve you of experienced counsel that will help you avoid many costly problems later on. Amongst the important areas where you will need advice when starting a business are:

  • Real estate
  • Corporate, commercial and securities
  • Accounting and tax
  • Industry-specific technical aspects
  • The legal aspects of all these areas

Don’t assume that you can get by with just enough for now and see how it pans out later. Retain experts that will help you lay a solid foundation for your business.

#2: Draw up a founders’ agreement

When starting a business a startup, another crucial foundational step to take is to draw up a clear founder’s agreement. The agreement should clearly define the roles and responsibilities of the founding team, equity and vesting ownership as well as assignment of IP ownership.

Startups often overlook this stage either because they’re all caught up in the rush and excitement of starting a business or because they feel the friendship of the founders will preclude disagreement.

Nothing could be further from the truth. In the survey conducted by CB Insights, 13% of the 101 startups surveyed confessed that disharmony amongst founders was a fatal issue for them.

Drafting an agreement ensures that your friendship remains intact and that possible disputes can be anticipated and clearly dealt with beforehand.

#3: Find the best structure and set it up properly

Choosing your business structure will be one of the most important decisions you make. This is because it will determine what strategies and advantages will be open to your business and the obligations that the business will have.

Do you want to go with a sole proprietorship, a partnership (whether limited or unlimited), start an LLC or corporation? Although sole proprietorships are very popular amongst Americans when starting a business ( 4 out of 5), the liabilities involved may be crippling. A sole proprietor may be personally exposed if the business goes bust.

Limited partnerships and LLCs provide a bit more protection in this regard. You can limit the extent of your personal liability through an LP or keep the business separate from yourself with an LLC.

Whichever you settle on should be the product of considered thought, taking into consideration your plans for the business and your circumstances.

#4: Ensure you have the right licenses

Failing to satisfy all regulatory requirements from the start is a bit like building a sandcastle on the seashore. Regardless of whether you’re looking to cut corners on some licenses, or you failed to get them out of ignorance, the end result will be expensive for your business.

Businesses that operate without the required licenses may be open to hefty fines. Worse, however, is the damage your business may suffer by squandering your reputation with customers.

You should work with a trusted legal advisor who can keep you updated on all regulatory requirements as well as the changes you need to keep an eye on.

#5: Make your contracts written

Written contracts are an absolutely essential requirement for any dealings involving your business. You must develop a culture of having written contracts for employment, investments, dealings with contractors and everything in between.

You may think contracts unnecessarily complicate transactions but it’s always better to be safe than sorry. If you had to choose between an expensive legal battle because of unclear terms and having to read through the contractual fine print that covers all the bases, you’ll pick the fine print in a heartbeat.

Having written contracts sets out your business relationship clearly. It will also help you insert important clauses (such as NDAs and non-competes) that will protect your business and your interests.

An important point though is to avoid ‘standard agreements’ found online. While you may think you’re cutting costs, you may only be digging a bigger hole for your business than you expect. Your contracts should be tailored to fit the specific circumstances and requirements of your transaction. Dealing with a qualified corporate lawyer will save you much more than the cost of their services.

#6: Pay attention to your tax obligations

In a study conducted to understand why businesses fail, Statistic Brain found that incompetence, at 46%, was the most common reason for business failure. These businesses failed because they did too many things poorly, including paying attention to their tax obligations.

Once you have set up your business, you are required to be registered for taxes and file returns with payments of all applicable taxes on a regular basis. But this is one task that business owners are ill-equipped to handle.

Except you are a tax professional, you have no business trying to handle the tax liabilities of your business. This is a task that is best left for professionals who will not only help you put your books in order but also help you find ways to save money on your taxes.

Eventually, your business gains much more than it will cost you to keep a tax professional on retainer.

#7: Protect your intellectual property

With the increasing significance of the digital economy, intellectual property rights have never been more crucial to business success. If you want to secure funding, monetize your discoveries or have a shot at eventually selling your business for big bucks, IP rights are crucial.

Your business idea and its expression, your logo, unique designs, systems, and processes all form part of your business’ intellectual property. They contribute significantly to the value of your company and will eventually be the single factor most important to how your business makes money.

Huge brands like Coca-Cola, Google and Apple only became as big they are because they jealously protected their intellectual property. It will be vital for your business to also do so.

Draft clear agreements so your business IP will be protected in relation to the work of independent contracts, employees and even founders. Documents such as a deed of assignment or appropriately worded clauses in agreements will help ensure this protection.

#8: Find a good lawyer

Eventually, we cannot possibly exhaust all the legal issues you must keep an eye out for in this article. But you can access a never-ending stream of solid legal advice tailored to your specific circumstances when you find and retain a qualified business lawyer.

Regardless of what industry you function in, you will need a good lawyer to help guide you and ensure that your business is operating within applicable legal boundaries.

Even more important, having a competent corporate lawyer on your team will position your business properly to anticipate and swiftly take advantage of opportunities.

The Law Office of Rocco E. Cozza, PLLC has built up a reputation for providing a business-savvy approach to legal issues. We are not just content with providing legal advice; we are agile, efficient and creative lawyers that are keenly interested in helping your business grow.

To discuss your business needs or get our take on legal issues affecting your business, call us on 412-294-8444 or send us an email at rcozza@cozzalaw.com today.

Cozza Law Group Business Law Blog

How Restrictive Covenants And Non-Compete Agreements Are Enforced

By Rocco Cozza • August 22, 2026
The enforceability of restrictive covenants and non-compete agreements depends on various factors, including how and when the employee/contractor initially signed the document. A company or employer may find it easier to enforce these agreements if they work with business law attorneys in Pittsburgh during the initial drafting and signing processes. If a company can steer clear of common mistakes from the very beginning, it can protect its competitiveness and avoid issues caused by former employees/contractors. Pennsylvania Only Enforces Non-Compete Agreements That Meet Five Requirements While Pennsylvania does not have a clear statute governing non-compete agreements, past cases have established a three-part test for their enforceability. First, a non-compete agreement must clearly define a timeframe in order to be enforceable. In other words, it must have an expiry date. You cannot stop an employee or contractor from competing indefinitely. Case law also suggests that non-compete agreements with the strongest enforceability are only valid for a few years (and not decades). A Pennsylvania court is also likely to reject a non-compete agreement with an ill-defined scope. In other words, the contract must describe exactly what the employee or contractor is prohibited from doing. The scope must also be reasonable, meaning you can only prevent employees from joining clear competitors. If a company is only distantly related to your industry or field, a non-compete probably can’t prevent your former employee from joining that organization. Scope also encompasses the type of company information that the employee uses to compete in the future. You cannot stop a former employee from using their own inherent skills and knowledge to set up a competing business. The only way you can legitimately curb competition from a former employee is by limiting the way they use your company’s “confidential information.” You might be surprised to learn that your former employees have every right to use company information that you consider to be confidential. As long as that information is publicly available, your employees can use it freely. This includes price lists, your suppliers' contact information, and general business practices well-known in your industry. One example of “confidential information” in this context is a list of your customers, complete with their email addresses and telephone numbers. Although this information might be publicly available, a normal person would not be able to recreate the finished list without spending years building a business (as you have). Intellectual property is another example of protected, confidential business information. If you have gone through the trouble of obtaining a patent or a copyright, your employee has no right to steal this information and use it to set up a competing business. The same logic applies to “trade secrets,” which may include confidential formulas or recipes. That said, it is important to remember that these violations are governed by intellectual property law, and not necessarily non-compete agreements. Non-compete agreements in Pennsylvania must also clearly define their geographical “reach.” You can only prevent an employee from competing with you in your geographical area, such as the City of Pittsburgh or Allegheny County. Even if your employee signs a non-compete agreement, they could theoretically travel to another state or country before starting a competing business. Finally, companies in Pennsylvania generally need to offer employees or contractors something in return for signing non-compete agreements. If the penalties for violating the agreement represent the “stick,” then the reward represents the “carrot.” In business law, this reward is called “consideration.” A common type of consideration is a job offer. With the job offer on the table, there is a clear reward for signing the non-compete agreement. On the other hand, the potential employee could always walk away from the job offer without excessive penalties. Another type of consideration is career advancement. This might be a raise or a promotion. An employee may decide to sign a non-compete agreement in order to access these career benefits. If they reject the offer, they would presumably keep their current position in the company without any other consequences. Pennsylvania courts may deem unenforceable a non-compete agreement that lacks these promised rewards. In the eyes of the court, an employee faces a difficult situation if they could lose their job by not signing a non-compete agreement. As with all contracts, duress or undue influence can make non-compete agreements unenforceable. Penalties Help Enforce Valid Non-Compete Agreements Assuming a non-compete agreement is valid, what exactly stops an employee from violating it? Without effective penalties, a non-compete agreement is useless. You can enforce your non-compete agreements with “injunctions.” These are court orders that require your former employee or contractor to immediately stop working for the competing business. If they have set up their own business, a court order could force them to shut down operations. Penalties may also include damages. The court can order the competing employee or contractor to pay compensation for your losses. For example, an employee might have stolen all of your customers by offering the same services for a lower price. In this situation, you could recover all of the profit you would have earned if those customers had remained loyal. Negotiation Is Often the First Step of Enforcement While taking your former employee or contractor to court can lead to positive results, most parties attempt to resolve their disputes through negotiation first. Indeed, mandatory “arbitration clauses” are often built into non-compete agreements. A business law attorney can represent your best interests during these negotiations, ensuring positive outcomes without an expensive, time-consuming trial. Can a Business Law Attorney in Pittsburgh Help Me? A b usiness law attorney in Pittsburgh may be able to help if you are serious about making your restrictive covenants and non-compete agreements as enforceable as possible. Legal assistance with drafting and negotiating these agreements from the outset may improve their enforceability if a dispute arises later. That said, lawyers can also help resolve disputes over restrictive covenants signed long in the past. To explore this topic further, consider contacting Cozza Law Group, PLLC at (412) 790-2789. You can also find us online .

Understanding Shareholder Disputes and How They are Resolved

By Rocco Cozza • June 8, 2026
Shareholders set corporations apart from other types of businesses, and they often help companies achieve considerable levels of success. On the other hand, executives and directors often forget that each shareholder is a part owner. With so many owners, it is easy to see how complex shareholder disputes can become. The first step is to understand why and how these shareholder disputes arise. The second step is to resolve the dispute, potentially with guidance from an experienced business litigation attorney in Pennsylvania . Shareholder Disputes Arise Because of Shareholder Rights To understand shareholder disputes, you first have to understand shareholder rights. Common shareholders have voting privileges, which means they can control the trajectory of the company. Although some shareholders never bother to vote, others take these rights very seriously. The more shares you have, the more power you have to control major decisions. Shareholders also have the right to profit from the success of a company. Because of this, they have a financial incentive to oversee the company’s trajectory. If the company leadership starts to make mistakes or intentionally act against the interests of the shareholders, disputes naturally arise. Finally, shareholders rely on the accuracy of records and corporate books to make their investment decisions. For example, they might choose to sell or hold their stocks depending on the published earnings of a company. If these records are inaccurate or intentionally altered, the shareholders may make poor investment choices as a result. Now that you understand shareholder rights, it is easy to see how shareholder disputes might arise. Shareholders might sue if they feel that the company is making major decisions without bothering to hold votes. They might also sue if they feel that the leadership is acting against their best interests. Another type of lawsuit might involve shareholders suing a company for inflating their earnings and releasing inaccurate data. Shareholder Disputes Often Begin With Alternative Dispute Resolution Most lawsuits, including shareholder disputes, go through a process of alternative dispute resolution (ADR) before parties actually proceed to the courtroom. ADR may involve mediation or arbitration, and it takes the form of private negotiations. The shareholders may select legal counsel to negotiate on their behalf, as it would be impractical for thousands of individuals to sit at the negotiation table. In other situations, an individual shareholder might file a lawsuit on their own. In this situation, that individual might be present at the negotiation table alongside their legal counsel. ADR often serves everyone’s best interests, helping to resolve disputes without resorting to expensive and time-consuming litigation. Public trials are not good for business, and shareholders might be just as willing to resolve these issues in private as the executive suite. Arbitration clauses are often “built in” to the corporate bylaws or charter. In other words, parties may have no choice but to attempt mediation/arbitration before proceeding to a trial. That said, parties are under no obligation to successfully complete the arbitration process. One party could refuse to negotiate, and a trial would subsequently become inevitable. What are Some Common Types of Shareholder Disputes? Shareholder disputes may take various forms. All of these lawsuits fall into four main categories, however. An individual shareholder might file a direct lawsuit against the company. Another type of lawsuit might be a “derivative suit,” which involves the shareholders suing on behalf of the corporation. This type of lawsuit often targets a specific bad actor within the company, such as a self-dealing CEO. Class actions are also relatively common. In this type of lawsuit, numerous shareholders join forces to file a single lawsuit against the corporation, often under federal securities law. Finally, a dispute might take the form of an “appraisal proceeding,” which focuses on whether the company has received a fair valuation before a merger. How Does Pennsylvania Law Affect Shareholder Disputes? Pennsylvania law is quite deferential to the board of directors, granting it considerable control and authority. A common source of conflict in a corporation is the contrast between the “democracy” of the shareholders and the authority of the board of directors. Pennsylvania tilts the scales in favor of the board. First, Pennsylvania requires a shareholder to make a written demand to the board before they can file a derivative lawsuit. The board can then appoint a “Special Litigation Committee” to investigate the shareholders' claims and demands. If the committee determines that a lawsuit would go against the best interests of the company, courts in Pennsylvania may not allow it to continue. It is difficult to circumvent these requirements for derivative lawsuits in the Keystone State because of strict limits on direct lawsuits. Finally, Pennsylvania has no rule that states a board must place its shareholders’ interests above those of other relevant parties. These parties might include employees, customers, suppliers, and even the greater community or environment. This is not the same in other jurisdictions, making the Keystone State a “board-friendly” state that repels takeovers. In fact, it is considered by many to be the most management-friendly state in the country and one of the toughest places for shareholder plaintiffs to sue. While this is good news for boards facing shareholder lawsuits, the Keystone State’s protections are not infinite. Effective legal representation is necessary to take advantage of the jurisdiction’s legal safeguards. On the other hand, plaintiff shareholders can still achieve success in Pennsylvania, but they may need to rely on innovative, experienced business litigation lawyers in the face of strong regulatory barriers. Contact Cozza Law Group PLLC to Learn More About Shareholder Disputes While online research can provide plenty of insights into shareholder disputes, each case is slightly different. Given the varied nature of shareholder disputes, it may help to discuss your specific circumstances with a business litigation attorney in Pennsylvania . Cozza Law Group PLLC serves enterprises of all sizes, offering a fractional counsel model that provides legal guidance that fits your company’s unique needs. Continue this dialogue by contacting us at 412-453-8673 or visiting us online .