The number of operational startups in Brazil continues to expand. According to the Brazilian Startups Association (Abstartups), the country already has over 14,000 active businesses, and the ecosystem continues to attract thousands of investors and moves billions of reais annually, according to market data. However, despite the growth, many entrepreneurs still neglect a crucial aspect: the legal security of the operation.
According to Matheus Martins, lawyer and founder of Barcelos Martins Advogados, a boutique firm specializing in legal advisory for startups, basic mistakes made in the initial phase can lead to significant losses and even derail investment rounds. “Founders are usually so focused on product and fundraising that they set aside the legal aspect, which is the foundation of any business. Without a solid structure, the startup risks stalling precisely when it starts to grow,” explains the lawyer, a specialist in Venture Capital and Corporate Law.
Below you will find five legal mistakes that startups make and how to avoid them:
1. Lack of a partnership agreement
The absence of a shareholders“ agreement is one of the main mistakes of early-stage startups. This document defines roles, responsibilities, and rights, preventing future disputes. ”It's common to see partners ending their partnership without a clear definition of who keeps the product, the brand, or the clients. The contract is what separates a professional partnership from an informal friendship," highlights Martins..
2. Not formalizing relationships with collaborators and service providers
Startups often hire freelancers, developers, and service providers without proper legal instruments. This can lead to labor lawsuits and questions about intellectual property. The ideal is to formalize everything through service provision contracts and clauses for the assignment of copyright and code.
3. Ignoring brand and intellectual property protection
Registering the trademark with the National Institute of Industrial Property (INPI) is essential. Without this step, another company can use the same name and even prevent its future use. According to market studies, the number of startups with a registered trademark is still low in the country, a high risk for those seeking investment.
4. Neglecting compliance and data privacy
With the LGPD (General Data Protection Law) in effect since 2020, companies that collect and store personal data must follow strict protocols. The oversight by the National Data Protection Authority (ANPD) has intensified, with the initiation of several sanctioning proceedings. Startups that handle data without a privacy policy may face sanctions and lose credibility with investors.
5. Lack of preparation for investment rounds
The absence of governance, vesting clauses, and a clear corporate structure can deter investors. “Venture capital funds conduct thorough due diligence. If the company is not legally organized, the round falls through before it even begins,” warns Martins..
For the lawyer, legal maturity is an essential part of the professionalization of Brazilian startups. “Founders need to understand that legal is not a cost, it's an investment. A well-drafted contract can save months of litigation and thousands of reais in fees in the future,” concludes the specialist.
