How to Protect Your Business from Legal Blind Spots Every Founder Misses with Rocco Cozza
- Jeff Hancher
- 7 days ago
- 8 min read
Most entrepreneurs don’t fail because they lack vision. They fail because they didn’t protect their vision. In this episode, Jeff Hancher interviews Rocco Cozza, managing partner of Cozza Law Group and TEDx speaker, to reveal the most common legal mistakes founders make. Discover why your business entity matters, the danger of using online contracts, and how to safeguard your brand with proper trademarks and copyrights. Rocco’s insights will help you build a strong legal foundation, avoid unnecessary taxes, and protect your intellectual property. This is your roadmap to building a business that lasts.
About Rocco Cozza
Rocco is the founder and managing partner of Cozza Law Group. He has been practicing law since 2003 with expertise in business, entertainment, sports, real estate, and intellectual property. He holds a JD from Duquesne University and an MBA from Waynesburg University, and he's also an author, known for his TEDx talk, "Radical Kindness." Why the Unbillable Hour Matters Most in Business. Rocco founded the CLG Foundation to empower underprivileged youth and serves on several nonprofit boards.
Why did you become a lawyer?
I grew up in Newhouse, a small town with a low to middle-class population. I didn't know any lawyers; no one in my family had even gone to college. As a kid, all I knew was that I loved solving problems. I just loved the ability to take a situation, pull it apart, and piece it back together differently. But I also had the entrepreneur. I was selling baseball cards, always trying to find ways to make money. I started college with the intention of pursuing a pre-law degree, but I fell in love with psychology, learning what makes a person tick and why they think the way they do. I applied to a master's program in child psychology, but when I was waitlisted, I took a year off, took the LSAT, and eventually attended law school.
The first year of law school is tough, but I got in the right frame of mind by working as a personal trainer, opening the gym every day at 6 a.m., so I was used to working hard and getting up early. That job really helped me develop the discipline required for the first year of law school.
What was your first job after law school, and how did it lead you to start your own business?
I worked in a big law firm. It was one of the largest employment law firms in the country. However, when the partners I worked for left the firm, I secured a new position as corporate counsel for a corporation. I was promoted to general counsel within a year. What was supposed to be a 3-5 year job turned into a 14-year career. I got to travel and learn a lot, but it didn't fuel my passion.
In 2017, I turned 40. Later that year, my grandmother, who was a huge inspiration in my life, passed away in December. I felt like that was my sign to make the leap. In February 2018, I gave four weeks' notice that I was quitting and put myself in a position where I had to figure something out. It was probably the scariest moment of my life because I had young kids, my son was getting ready to go to college, and I was the primary breadwinner.
I went from making multiple six figures to starting at zero. Every month, I had to start at zero. I was excited about it, but there were moments I'd wake up in a panic in the middle of the night, asking myself, "What did I do?" But every time I was about to quit, something happened that kept me on the path.
What are some of the most common legal mistakes you see entrepreneurs make when they're just starting the journey?
The biggest mistake is how entrepreneurs form their company. I always say that is the foundation of your business. And I use the analogy, if you're building a house, do you pour the foundation yourself, or do you paint the walls yourself? When setting up your entity and ensuring the proper structure and documents are in place for your company, work with an expert. Don't try to do it through one of these online sites because if you don't know the way to answer one of the questions or the type of structure you need for now and five years from now, it's going to cost you so much more money to unwind things. You'll also set yourself up to pay more money and taxes, and take on a lot more liability.
How do I get started?
For most small to mid-sized businesses, the best entity is an LLC, as it offers flexibility. LLC stands for a limited liability company. It allows for a minimal administrative burden to operate the company, but it also gives you the ability to be taxed differently. For 99% of clients who come to us, whether they are new businesses or side hustles, an LLC makes the most sense because it's very easy to set up. They're relatively inexpensive to do. You have the advantages of being taxed as a sole proprietor when you start, so it gives you some flexibility. However, as you start making more money, you can elect to be taxed as an S Corporation, which saves you approximately 50% of the money you earn, as you don't pay self-employment tax on it.
What if I set up my business wrong?
When it comes to converting an entity, it is usually as simple as changing some paperwork. At the state level, this is an entity conversion. You should do it sooner rather than later. Don't wait until you've gone too far down the road and become too invested in the business.
We conduct what we call health checks of businesses, where we aim to understand your business and how it operates. If you can make the right changes upfront, they're relatively inexpensive to implement. Then, you're set up for the long-term. If you do it right from the beginning, you're going to save yourself time, money, and a lot of heartburn and headaches down the road.
What are the risks of using online contracts or ChatGPT?
The first agreement you can make is verbal. Verbal agreements can be enforceable as long as you have all the elements of a contract. The problem is that if nothing's in writing, it's he said, she said. When considering a significant transaction, such as entering into a partnership, selling a service, or selling a product, having something in writing is an absolute must. If you're not willing to do that, you're not ready to be in business.
Another problem with agreements obtained from Google or ChatGPT is that they are not
tailored to your specific needs. You'll only get about 30% of what you need in a basic agreement. Every little situation can change the dynamic of a contract. When you're putting a contract together, the lawyer you're working with has to intimately understand your business. What is the service or product you sell? Is it intellectual property or not? Is it a commodity-type product or service? What are you trying to do? Grow this company? Sell the company? What are the potential risks? You have to account for all of this in a contract.
What about payment terms? I tell people to assume that the two people who negotiate the contract get both hit by a bus. Can someone review the contract on both sides and determine exactly who's responsible for what? If you can't do that, you need to rewrite your contract.
Should I go into business with a partner?
Most people enter into a partnership because they feel insecure about starting a business; they may not actually need a partnership. However, if you are going to enter into a partnership, the best partnerships work when both individuals bring different levels of expertise to the business. Start by planning the four Ds. What if we disagree? What if one of us gets divorced? What if one of us gets disabled? What if one of us dies? These all impact the company. If you plan for it up front, you know what to do, and you save money on litigation after the fact.
Are there agreements that every founder should consider, regardless of the business's size?
You should always have a non-disclosure agreement in place. If you're talking about something proprietary that you've created and you want to share it with someone, have a non-disclosure agreement. A service-based business should also always have a written agreement to cover the service. If you have employees, you should have an employment agreement or some other document that outlines their compensation, payment schedule, time-off policies, benefits, procedures for leaving the company, and protocols for protecting your property, among other details.
The problem with 1099 employees
I've handled three or four audits in the past year for my clients. The Department of Labor audited them because they were miscategorizing their contractors. You can call somebody a contractor, but they might not truly be a contractor. One of the key factors the Department of Labor considers is whether the contractor is operating as an independent business. There's a six-part test that the Department of Labor considers, and the most significant aspect is whether they can lose money working for you. If they can't, you probably need to reconsider your approach.
What are some intellectual property blind spots that founders have?
Two of them are trademarks and copyrights, and most founders are unaware of the difference or confuse them. A trademark is a name, logo, or slogan associated with a good or service, such as the Nike swoosh or the McDonald's M. A copyright is the protection of an original work, meaning a photograph, a movie, a song, or a book. If it's an original work, you own the copyright in it. Registering it with the federal government just now allows you to sue in federal court, and it puts the world on notice. Founders also think that if you trademark something, no one can ever use it. However, you must actually file for the trademark in every class. I always use the example of Dove Chocolate and Dove soap. They look similar, but they are in different classes.
What legal considerations do companies have as they grow?
First, ensure your contract can withstand growth. Many times, people put their contracts together for the way their business is, not for where it is going. Do you have your foundational documents aligned? You must constantly audit the company's status to ensure it aligns with your objectives and how the business evolves as it grows.
What other legal topics should business owners be aware of?
Non-compete agreements. The FTC tried to ban them, but the Supreme Court reversed the ban. Pennsylvania has banned them for healthcare providers. I tell my clients, don't focus on non-compete. Focus on non-solicitation. Protect your clients, your people, and your intellectual property. You want people who leave your company to agree not to take their employees or their clients. It must be enforced evenly; otherwise, the courts will not rule in your favor.
Application Activities:
What have you DIYed that you should have hired an expert for? If you're not a business owner, look beyond your contracts and business setup. Consider the processes you've copied without looking to see if they fully serve you, the computer setup you put together with YouTube and prayer, or even the house project that has been sitting half-done for months. If you decide you should have hired an expert, ask your network to help you identify someone reliable to trust with the project.
Invest time in identifying your legal blind spots. Take 30 minutes to list all the legal documents and registrations your business currently has, such as contracts, NDAs, trademarks, entity filings, or partnership agreements. Next to each, note the last time it was reviewed or updated. Ask yourself:
· Do I have written contracts for every client, vendor, or partner?
· Is my business entity (LLC, S Corp, etc.) still the best fit for my current size and goals?
· Have I protected my brand name, logo, or creative work with trademarks or copyrights?
Circle the areas where you don’t have clarity. Those are your legal blind spots. Schedule a meeting with a qualified business attorney to review those areas and create an action plan.
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