What are the top 5 legal mistakes small business owners make?
Failing to establish the right legal structure for the business: One of the most important decisions for any small business is choosing the right legal structure, such as a sole proprietorship, partnership, LLC or corporation. Each type of structure has different legal requirements and tax implications, so it's important to consult with a lawyer or accountant to ensure that you choose the right one for your business.
Not having clear contracts with clients or vendors: Contracts are an essential part of doing business, but many small business owners fail to put them in place or use poorly drafted ones that leave them vulnerable to disputes or lawsuits. Having clear contracts in place can protect your business from legal risks, and help you to manage expectations with your clients or vendors.
Ignoring employment laws and regulations: Small businesses often hire employees, but they may not be familiar with the many employment laws and regulations that apply to them. This can lead to mistakes like misclassifying workers as independent contractors, failing to pay minimum wage or overtime, or discriminating against certain employees. To avoid these legal risks, it's important to consult with an attorney or HR professional to ensure that you are in compliance with all applicable laws and regulations.
Not protecting intellectual property: Small businesses often have valuable intellectual property, such as trademarks, copyrights, or trade secrets, but they may fail to protect them properly. This can leave them vulnerable to infringement by competitors, or even lawsuits by others who claim ownership of the same intellectual property. To avoid these risks, small business owners should consult with an attorney to ensure that they have taken the necessary steps to protect their intellectual property.
Failing to plan for legal disputes: Even the best-run businesses can face legal disputes, whether with customers, vendors, or other parties. Small business owners should have a plan in place for handling disputes, such as having clear policies for resolving conflicts, and knowing when to involve an attorney to help them navigate the legal system.
By avoiding these common legal mistakes, small business owners can better protect their businesses and minimize legal risks. It's always a good idea to consult with an experienced attorney to ensure that you are in compliance with all applicable laws and regulations.