Small business owners make legal mistakes all of the time, which often results in the downfall of a company. Without the proper knowledge, business owners find themselves repeating the same mistakes. The SBA (Small Business Association) stresses the importance of ending the circle of disastrous legal errors by investing in Continuing Education business courses, or by hiring a business consultant.
There are many web sites that offer legal advice for the small business owner. Here are just a few situations that may arise where you should know your legal rights. In all these situations you may find it necessary to contact an experienced corporate attorney.
Service Agreements – Conducting business involves drafting up a Statement of Work or a Written Agreement. Without a contract, it is difficult to enforce the law. Carefully draw up the business terms, draft it in the company’s favor, and provide flexibility and protection.
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.
Employment Termination– To keep overhead costs down, a major percentage of small businesses begins with a low number of employees. Staff members come and go, as business growth changes. It makes no sense to keep staff on the payroll if the business can’t support the wages.
Sometimes employees will threaten with “Unlawful Discharge” suits. It is important that each member knows they are an “at will employee,” which means they can be terminated at any time, or for any legitimate reason.
If you need some additional help many small businesses choose to hire independent contractors. Hiring independent contractors can seem like a simple choice since you’re not responsible for reporting their earnings to 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.
When starting your business you need to know how your business is classified. You may be a sole proprietor or perhaps in a partnership. Each of these designations carries its own legal ramifications. For instance as a sole proprietor you are vulnerable to legal action taken against your company.
A better choice would be to start your company as a limited liability corporation. This means your company is a separate entity that must deal with its own legal issues and you are not personally held liable.
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.
Do your research and compare fees. The long term relationship you build with your corporate attorney will have its value. All businesses should make an investment in a “good” corporate attorney.
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.
If it anytime you feel in over your head, consult with an attorney. Business owners can get themselves into very serious trouble without the proper legal knowledge.
