If you’re a small business owner who knows little about the legalities involved with running a small business you’re not alone. The Small Business Association recommends that small business owners take one if not several legal classes in order to familiarize themselves with potential legal issues. Not knowing where you stand in certain legal matters can leave you at a serious disadvantage. Get to know your rights so you can make smart business decisions.
In today’s world of technology, several resources offer up-to-date material on business procedures that directly affect the legitimacy of a company. The following are a list of common mistakes and ‘how-to’ avoid repeating them.
Contracts or service agreements are a must for any small business. It is difficult to uphold a verbal agreement in court and therefore a well written service agreement can protect you and your business. The service agreement should clearly define all policies and agreements. It should provide protection for your company and its interests.
Start by listing the ‘scope’ of the service. For instance, cleaning a home would take 2-hours. In those 2-hours, list ‘what’ service and ‘how’ long it will take. Include anything that may be a special request. Excluding a portion of the service could be a costly mistake. Drafting a contract takes time, but it is necessary.
At some point you may need to hire or fire employees. Many small business owners are unaware of their rights and their employee’s rights. Even though you may only have one employee it is important that you are well versed in labor standards and other regulations. If you need to terminate one of your employees it is vital that you do it properly.
In order to avoid unlawful discharge law suits carefully select your employees and read up on the proper procedure for terminating employees. This may be a situation were you should immediately contact a corporate attorney.
Hiring Independent Contractors – To avoid some of the hefty labor taxes, small business owners hire Independent Contractors to take up the slack. IC’s (Independent Contractors) are responsible for claiming their income and expenses and filing with the IRS.
You should know that some jobs are actually considered to be an employee’s job regardless if it is done by an independent contractor or not. The IRS has its own definitions that you should be aware of before hiring any independent contractor. Protect yourself and your business and be fully aware of any legal ramifications before making any business decisions.
Sole Proprietorship verses L.L.C. – Under many state laws, founding partners are jointly liable for the debts and obligations in general partnerships. Operating a business as the sole proprietorship puts the owner in a vulnerable position.
Start a business as a L.L.C. (Limited Liability Corporation) instead. This will eliminate the risk of loosing personal funds due to allegations in a lawsuit.
Intellectual Property Issues – Even low-tech companies have intellectual proper issues that directly affect the long-term success of the business. Pay close attention to confidentiality and invention assignment agreements, registered trademarks, and copyright notices. Protect the company’s trade secrets adequately.
If you don’t want problems with the IRS, good record keeping and accounting is essential. You can cause serious problems for yourself and your company if you don’t keep records of all business transactions.
You may want to hire a bookkeeper or accountant to deal with accounting issues. If you can’t afford to do so be sure to take a course on business accounting to ensure you have proper records of everything.
In any of the above situations you may find it necessary to contact an experienced corporate attorney. Almost all businesses at some point in time will need the advice or services of a professional. While most attorneys do charge a high fee, there are times when this is necessary.
Without a doubt, a business should run erring on the side of caution. Choosing to operate without the proper knowledge on business laws and business ethics, will lead to disaster. Check with an attorney before pursuing a business and start on the right foot.
