Startup companies have a lot of things to worry about as they become established in the market. One of the most important things you will need to attend to when creating a startup is setting the framework for data privacy compliance.

Multiple state, federal, and even international laws govern the collection and use of consumer data. Failure to comply with these laws could have a devastating effect on your startup's future.

1. Government Sanctions

If your startup violates any data privacy laws, you could face government sanctions. A government official will investigate all of your business dealings to identify where the data breach occurred. This auditing process can expose any minor mistakes your new company has made.

Sanctions can vary from one company to the next, but you can expect to pay a fine and have your transactions limited in some way. These limitations could make it difficult for your startup to grow, compromising the viability of your company over time.

2. Lawsuits

Any failure to comply with data privacy laws creates an opportunity for someone to file a lawsuit against your company.

The consumers who have their data compromised as a result of the breach can bring individual claims against your company in court. These consumers could also choose to band together and file a class action lawsuit.

If your data breach compromised any credit card payments, credit card companies could also pursue legal action against your startup.

These lawsuits can be costly to cope with, which will take valuable resources away from your startup.

3. Damaged Reputation

Startups must work hard to establish a reputation for themselves in the consumer market. A positive reputation is critical to the ongoing success of any company, but it is especially important to startups who are struggling to attract customers.

If word gets out that your startup has failed to comply with data privacy laws, this could have devastating consequences. Consumers who haven't worked with your startup will be hesitant to complete future transactions due to their fear of another data breach.

The easiest way to avoid a damaged reputation is to establish a comprehensive data privacy policy that will govern your startup from the very beginning.

A business attorney will be invaluable in helping you ensure your startup is complying with all applicable data privacy laws. Your attorney can assist in drafting a privacy policy that will shield your startup against potential legal pitfalls.