Simple Legal Tips For A Successful Small Business

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Small business owners often have the misconception that their commercial holdings, transactions and presence is not significant enough to need legal representation on a regular basis but as your small business grows, there are many considerations to bear in mind. 

Here are some simple legal tips to help you run your small business without needless hurdles and complications.

Be clear on your status 

The type of small business is an important factor and has any number of legal implications from liable taxes to import restrictions. Always register your business with the appropriate governing body in your state, city or area so that you can keep track of tax allowances or other laws and regulations passed by the government. 

Legal Tips For A Successful Small Business

Even if you are a tiny home-operated business you will still need to register yourself as a sole trader or independent contractor etc. Having the relevant documentation all in place will help you should you ever need to seek legal help or if you need to file taxes or apply for a permit among other commercial requirements. 

No matter the size of your business, have a digital or physical filing system for all your tax payments, permit documents, major purchases, imports if any, as well as employee information to be able to prove in a court of law you are following the wage laws and regulations. Bookkeeping records become increasingly important as you invest in stocks and so forth or grow to become a bigger private or public limited company. 

Lastly, becoming a separate entity in the eyes of the law is a major aspect of protecting the scale of your liability. According to established regulation globally, a business is a separate legal entity from its owner so the business can be sued or entered into court proceedings without necessarily incurring liability or penalties on the owner or shareholders of that company. 

In terms of company assets, it is always better for them to be registered under the business as opposed to under a single or a couple of individuals as there is simply a greater amount of risk with the latter. 

Treat employees fairly 

A major reason for the downfall of many companies has been lawsuits based entirely on employee maltreatment or negligence.

Treat employees fairly

The downfall can be both financial in nature as well as irreparable damage to the company’s reputation which in turn greatly affects its sales volume and the level of customer trust it inspires as people become less likely to invest their money in an unfair or unethical business. 

Pay attention to all the wage laws and other laws relating to employees within a specific field such as perks, allowed hours and mandatory recreation. 

Companies should take extra care when offering payment in lieu of notice or unfair dismissal. Quickly settling employee conflict with such payments may lead to costly court appearances. Businesses must understand local laws and regulations to ensure they are not considered unjust enrichment or discriminatory.

If you work regularly with independent contractors or suppliers, you may want to have agreements with them so they do not suddenly cut supply or hike up prices unreasonably or start selling exclusively to your competitors. Individual agreements with employees and experts you have hired can help manage their expectations so they are not tempted to use the law as an outlet to increase wages or salaries or ask for perks. 

Always have legal counsel on retainer so the contract drafted for every new case of employment has clear and actionable terms. 

Insist on written agreements 

Many businesses especially when they are small or startups rely on oral communication or legally void digital channels which will not hold up in court if one party defaults on a certain agreement. 

No matter which transaction or agreement is taking place always insist on written paperwork and contracts and keep digital copies to the same effect. When agreements are written down there is a lot of reading to be done between the lines and as any of the criminal defense lawyers Orlando will tell you, there are a lot of legal implications in the fine print should the company be taken to court. 

Keep an eye on intellectual property 

Intellectual property is a huge gray area for many companies as due to the internet and social media it is easier now than ever to steal someone’s logo, written content, graphics, branding and so forth. 

Work with a specialist lawyer to draft a policy to protect your intellectual property so you can continue to share content and carry out digital marketing safely. No company is immune from cybercrime and cyberattacks but having adequate legal representation can protect you from the worst of it and allow you to act on your legal rights as a company. 

Separate the finances

In the interest of lessening your personal liability when it comes to operating your small business and making it successful, always have a separate bank account or several for your enterprise.

finance blog

Keeping business money or handling transactions through your personal account can lead to all manner of legal trouble from the accurate calculation of taxes (commercial tax varies from individual income tax) to bookkeeping and paper trails regarding imports and so forth.

Have a separate bank account so that all the records and paperwork relating to your business are separate and can be accessed in a hassle-free way by the governmental agencies as per their rights and in case there is an audit. Commercial bank accounts may also come with extended perks like a higher loan or external financing limit and if there is a lawsuit, you will not need to pay from your personal assets or savings which may happen if your business is unregistered. 

Have a well-thought-out buy-sell agreement

As a small business grows, shareholders enter the picture and the ownership of the business itself can change entirely if it is merged, taken over or sold. Have your lawyer draw up a solid buy-sell agreement so that if you decide to give up the business or merge it into a bigger one or simply lose interest (or become diseased) there is a chain of command and modus operandi in place.

The future of a business needs to be protected the same way as a person as finances, reputation and success are all vital factors.

The buy-sell agreement is a document that among other things outlines the approximate value of a business taking into account dozens of factors from inflation, stock price, market share, customer base to even the product portfolio.

It also discusses the potential price of a business’s shares and what amount will be designated as a payout to the owner when he/she dies, leaves, or gives up their position due to any other reason.  

Do not underestimate NDAs

Non-disclosure agreements are legal documents drawn up to protect the interests of the business. They ensure that the individual that has either worked for or been in contact with the said business will not disclose company secrets as that will be detrimental.

If you hire an independent contractor to design a logo or work on a campaign or any other such temporary service, have them sign an NDA so they cannot claim theft of intellectual property in court or draw your business into any kind of lawsuit in the future.

You can have standard NDAs as well if you do not want to pay a lawyer’s fee each time but it is a good idea to have an attorney on retainer looking over your NDAs as well as all your written contracts before they are finalized. Make a point of converting all agreements and contracts to written form as verbal understanding or agreement almost never stands up in court should any contract go ill. 

Court is not the answer

If you want a successful small business then actively seeking litigation as a solution to any kind of dispute or misunderstanding is never the answer.

Every type and size of business should avoid litigation as far as possible and smaller businesses have more to lose in terms of fees and time lost. Seek arbitration if there is ever a dispute with a customer or supplier or competitor and let the two lawyers of each side work the matter out.

Court proceedings not only give the business a negative public image, but it also brings the stability of the business into question especially if the information is leaked to the media.

Plan out your contracts, keep track of and have records of all communication between your business and customers or suppliers and so forth and have a lawyer on-call to help you understand the terms and fine print of the contracts you are signing. 

The wonders of legal counsel

Small businesses sometimes have to cut corners in order to safeguard their finances and to stay profitable but the many advantages of legal advice and counsel must not be overlooked.

Staying Compliant Most Common Legal Issues Faced by Small Businesses

Whether it is about reading the fine print in contracts, drafting documents or finalizing agreements, a good lawyer on your side can protect your interests and help you land on the right side of every deal.

Stellar legal counsel can predict problematic situations as they arise which a new and less seasoned business owner may miss out on, only to be standing in court in the future. 

Conclusion

While investing in legal services may seem counterintuitive to the financial plan of most small businesses, it is a vital part of safeguarding the business’s future success. Certain precautions and standard practices can prevent costly legal battles later on.

About the author 

Peter Keszegh

Most people write this part in the third person but I won't. You're at the right place if you want to start or grow your online business. When I'm not busy scaling up my own or other people' businesses, you'll find me trying out new things and discovering new places. Connect with me on Facebook, just let me know how I can help.

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