Legal Issues of Small Businesses

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How to Avoid Common Legal Mistakes when Running a Small Business

May 03, 2018 - 6:32 pm

There are rules, regulations and laws surrounding just about every area of running a business. When owners don't understand the limitations of these regulations and laws, they run the risk of losing everything. There are also resources in place to assist business owners, because not knowing and internalizing these principles can ruin a business venture.


Always structure a business properly

One thing that some people don't understand when starting a business is that they are personally liable for anything that goes wrong. A person who does not structure his or her business correctly can lose everything if someone brings successful legal action against them, so from the start it’s critical to structure the business correctly. For a person who has a sole proprietorship, it sometimes seems like an unnecessary hassle to incorporate, but this is the only way to protect personal belongings if something goes wrong with the business itself. This can be an S-corp, an LLC, or a partnership, but something needs to be set up at the start to protect your property and also maximize possible benefits.


Avoid stealing intellectual property

You may have the perfect name chosen for your business, however, research it first to ensure that someone else has not already claimed it. The last thing a new business owner needs is to put a lot of money into promotional materials only to have to redo everything after finding out another company already exists under that name. Likewise, it is also necessary to make sure that your logo is free and clear to use, and if so, legally claim the original name and logo as soon as it is possible.


Make sure you have an exit strategy lined up

Understand your role in the new company. Furthermore, if there are multiple people involved, make sure that everyone has his or her own defined role as well. Nothing can destroy a business partnership like one person feeling like he is being taken advantage of or having his toes stepped on. Make sure everything is in writing, and all obligations are spelled out. After that, ensure that these original contracts specify how an individual can opt out and leave. Nothing lasts forever, and there needs to be a way for you and your business partners to walk away. Make sure that the way out is clear and outline what actions need to be taken. An attorney may be necessary to make sure that all agreements between business partners are legally binding.


Don't do it yourself

The best way to run a business without any problems sneaking up and hurting you down the line is by hiring an attorney. There are a lot of websites that promise to walk you through all the steps and let you save a few dollars by bypassing attorneys. However, by doing it yourself, there is the risk of leaving out something important or setting yourself up for a lawsuit down the line. Attorneys know the law and everything that needs to be done to ensure that a business is successful, legally run, and on the up-and-up. By making sure an attorney is involved, a person can avoid most of the legal mistakes that destroy many smaller businesses.



This article was written by Shawn Lealos for Small Business Pulse