Legal Mistakes to Avoid as a Business Owner

News 20 February, 2021

Starting a business often comes with many engagements. Among them include manufacturing, marketing your product and services, and increasing brand awareness. However, alongside the haste of getting your startup off the ground, most entrepreneurs tend to overlook the legal side of starting a business. Unfortunately, legal challenges are enough to bring down the entire venture. Below are some common legal mistakes to avoid when starting your business.

1.Not Seeking Legal Help

When starting the business, most entrepreneurs wear all hats. You possibly have to juggle between designing the products, developing a business plan, creating a marketing strategy, customer services, legal concerns, and more. Nobody is an expert in handling all these positions perfectly, and you can easily make mistakes. The consequences of such early mistakes are dire if they are of legal nature.

Therefore, seeking legal consultation as you start your business is the best way to avoid getting into legal trouble. Attorneys can help startups avoid various legal problems, including;

  • Tax issues
  • Negotiating fair terms, such as leases
  • Drafting contracts, disclaimers, and agreements
  • Assist in obtaining the required licenses, trademarks, and registrations

Even with such importance, most startup businesses ignore consulting legal entities due to limited financial resources. However, if that is your concern, you can take advantage of attorneys offering affordable options. For instance, some charge low monthly retainer fees or flat fees for specific issues.

2.Not Selecting the Right Business Structure

Whether you will run the business alone or with co-founders, you should decide the legal form to operate your business. You can structure your startup in various forms depending on your business circumstances. Choosing your business structure is important for your business as it determines tax amounts, protects business assets, business assets, and organizational expenses. Among them include;

  • Limited liability company
  • Limited partnerships
  • Corporation
  • Sole proprietorship
  • Non-profit
  • Cooperative

Conducting thorough research on each of these business structures and consulting professional legal advice significantly influence your business’ success. After choosing your preferred structure, you should understand the relevant jurisdictions as well.

3.Ignoring Employment Issues

Watching your business grow that you have to employ staff is certainly exciting. However, such growth also means that you have more to handle on your plate. While it is easy to onboard one or two employees, this can be the source of serious legal battles later. Good employees can help your business set off, while hiring subpar workers can significantly undermine all the business efforts.

In unexpected scenarios, working with bad employees often end in legal battles. Disagreements with your employees arise due to several causes, including claims of harassment, unfair union regulations, and other legal problems that can cost your business a lot of time and money. The current workforce is also educated and often sign work contracts with guidance from their employment attorneys.

Therefore, to avoid such, learn various legal constructs regarding hiring, managing, and firing employees. You should also understand state, federal, and local regulations about overtime payments, health and safety prerequisites, and specific industry requirements. Ensure that you hire and fire alongside these regulations to avoid legal troubles.

Understanding the law is good. However, you should create a comprehensive legal strategy around your employment policies and ensure your employees understand them. This should cover various employment terms, conduct, dressing rules, disciplinary procedures, filing complaints, and more. Your employees should read and sign against all these provisions for future protection.

Also, ensure that you address various employment issues immediately, especially regarding discrimination or harassment. Such basic issues are not only bad for your business but can also portray your business as unable to protect its employees.

4.Not Putting in Writing

Creating contracts and agreements certainly doesn’t take much effort. However, skipping the important step of documenting them formally is a serious issue with significant consequences. Anytime you make an agreement, ensure that you put it in writing and all parties sign against it. This ensures that all the parties are on the same page while creating a written record for future reference.

Some important things to document include;

  • Customer contracts/agreements
  • Disclaimers
  • Terms of service
  • Employment contracts
  • Business relationship contracts with vendors
  • Invoice and estimates
  • Warranties

All these should be documented in detail. This includes the names of various parties, duties and expectations from all parties, contact information, and other details. Apart from the official discussions, it is important to document casual conversations as well.

Bottom Line

Starting a business is an important step that you shouldn’t regret. This means protecting your venture from legal issues as much as possible. Legal troubles touching on businesses are expensive, time-consuming, and can drown your entire business. Fortunately, you can avoid such legal challenges by preparing in advance. Avoiding legal business cases is better than dealing with them.