Common Legal Mistakes Founders Make Without Realizing It
When you’re building a B2B company, legal issues aren’t usually the first thing you want to think about, but they’re one of the first things that can quietly derail your growth if you ignore them.
In this episode of Exploring Growth, host Lee Murray sits down with Jeff Holman, Founder and CEO of Intellectual Strategies, to break down how founders can get the legal help they need before they’re in crisis, and why the Fractional Legal model is an increasingly smart option for scaling companies.
Why Fractional Legal Exists — And Why It Works
Startups often reach a point where they need legal help but aren’t ready for (or can’t afford) full-time general counsel. That’s where fractional legal teams come in. This flexible model gives you access to experienced lawyers who understand your industry, without the overhead of hiring someone in-house.
It’s especially valuable for companies with complex needs, such as those handling intellectual property, evolving products, or distributed teams. Founders get strategic legal advice on-demand, while staying lean.
Avoiding the Legal Headache
One of the biggest mistakes founders make? Ignoring the “boring” work of getting the right documents and agreements in place before something goes wrong.
For example:
- Failing to clearly define contractor vs. employee status.
- Not spelling out how equity will vest or who owns IP.
- Vague or missing employment agreements.
- Hiring friends or family without proper onboarding or role clarity.
The result is messy disputes, unexpected costs, and wasted time fixing preventable issues. It’s usually not bad intentions that cause drama, but it’s a lack of clear systems and documented expectations.
Hire and Fire Without the Drama
Hiring and firing are among the riskiest areas for small businesses. Too many founders rely on handshake agreements when they bring in friends, early employees, or contractors. That might work at first, until someone feels they were promised more than they got.
Some tips to prevent costly misunderstandings includes:
- Get basic onboarding templates from a lawyer or trusted HR provider.
- Have an employee handbook that clearly spells out expectations.
- Document role changes, promotions, and performance issues.
- Communicate when responsibilities shift. Don’t let people feel “demoted” without explanation.
Good documentation will help you if you ever face a state labor board audit or a legal claim.
Use Systems to Avoid Legal Surprises
To put it simply: your company will rise or fall to the level of your systems. That’s true for operations and finances, and it’s definitely true for legal.
Many early-stage founders focus only on the excitement of building a product or getting to market, but strong legal systems (clear documents, well-defined roles, and trusted advisors) create the guardrails that keep you from derailing your growth later.
If you’re a first-time founder, don’t wait until something breaks. Talk to experienced founders, get template documents reviewed, and find a lawyer who understands fast-moving companies.
Legal Work Doesn’t Have to Be Intimidating
A strong legal strategy is about creating the space your company needs to grow without unnecessary distractions. When you have clear agreements, structured onboarding documents, and a trusted legal team that understands your stage of growth, you can prevent many issues before they become crises. This allows founders to stay focused on building the business while knowing that the operational and legal foundation can support the weight of future growth.
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*Disclaimer: This content is for general informational purposes only and does not constitute legal advice in any jurisdiction or create an attorney-client relationship with any attorney or law firm, including Intellectual Strategies. This might include legal advertising for applicable jurisdictions. Any discussion of past results, strategies, or outcomes does not guarantee similar results in any future matter. The views expressed do not necessarily reflect those of Intellectual Strategies or any affiliated organizations. Listeners, viewers, and readers should consult a qualified attorney for legal advice specific to their situation.
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