Starting and running a small business can be incredibly rewarding, but it’s also full of potential legal pitfalls. If you’re not careful, you could find yourself in trouble with the law without even realizing it. Here are 10 common legal mistakes small business owners make.
1. Not having an attorney review and sign contracts: Many small business owners believe that they don’t need an attorney to review and sign contracts because they are not negotiating the contract. However, even if you are not the party who is drafting the contract, you are still legally responsible for ensuring that the contract represents your interests. An attorney can review, negotiate changes and sign the contract on your behalf to ensure that it reflects your views.
2. Failing to have an exit plan: If you are considering closing your business or if you are steering into retirement, it is important to have a strategy for exiting your business before getting too far. Lack of planning can be disastrous, especially if you have partners or employees. Work with an attorney to create an exit plan that will protect your interests and those of your business.
3. Failing to set up the right business structure: One of the most important decisions you will make when starting your business is what type of business structure to set up. The wrong structure can lead to costly taxes, penalties and other problems down the road. Work with an attorney to ensure that you have set up the right structure for your business.
4. Not getting copyrights, patents, and trademarks: Protecting your intellectual property is essential to the success of your business. Without proper protection, others can copy or steal your ideas and you may not be able to take legal action to protect them. Work with an attorney to make sure that you have obtained the proper copyrights, patents and trademarks for your business.
5. Not filing taxes correctly: Is your business subject to sales/VAT taxes? Have you been withholding taxes from employees’ wages? These are just some of the many tax issues that small business owners face. If you are not filing your taxes correctly, you could be subject to penalties and fines. Work with an accountant or an attorney who can help you file your taxes correctly.
6. Failure to get the proper documentation on employees to keep records of business expenses: It is important to keep track of all your business-related expenses in order to get the full tax benefit. If you are not keeping accurate records, you may be missing out on legitimate write-offs that can save you money. Work with an accountant or an attorney who can help you accurately track and record your expenses.
7. Failing to get nondisclosure and non-compete agreements: You have proprietary information that belongs to your company. You should not allow your employees or business partners to take that information and use it for their personal gain. Work with an attorney to create nondisclosure agreements that protect your proprietary information. Anyone who works for you and who has access to this valuable information must be legally bound by these agreements.
8. Failing to get the right licenses and permits: Your business may require special licenses, permits, registrations or certificates in order to operate legally. For example, if you are selling a product, you may need a special license from the state. Failure to obtain the appropriate licenses and permits can result in fines and even imprisonment. Work with an attorney to make sure that your business is properly licensed and registered.
9. Inappropriate/incomplete contracts with outside vendors: Whether you are an independent consultant or a wholesale distributor, it is important to keep contracts with outside vendors in order. Contracts establish the terms of your relationship and can provide protections if something goes wrong. You may not be able to take legal action against another company if your contract is incomplete or inappropriate. Work with an attorney to make sure that all of your contracts are in order.
Legal matters can be complicated and time-consuming. Fortunately, there are legal professionals who specialize in what you need help with – from creating contracts to forming your business and protecting your intellectual property. There is no reason to go at it alone when you can get the help that you need with just a click of a button on LEGID. Sign up today at legid.app to get access to help from top legal experts.