Small business owners and aspiring entrepreneurs face many legal challenges. The learning curve associated with entrepreneurship is so large that many businesses often overlook this critical component of business start-up and design. Here the top 5 legal challenges business owners face are disclosed so you can begin establishing a plan to address the legal challenges that may be affecting your business.
- Choosing the right legal entity. The legal structure you choose goes a long way toward providing proper protection for yourself and your business. A sole proprietorship is the simplest, easiest, and lowest cost entity to create; however, that simplicity comes with a few caveats. Your business is not considered a separate entity as a sole proprietorship. This means that if your business is sued, not only are your business assets at risk, but your personal assets are at risk as well. The same goes in reverse. If you are personally sued, your business assets are at risk in any suit against you. If the type of work you do can be considered high risk, you will want to adopt a more protective legal structure to address these types of legal challenges as soon as possible. Corporations (C-Corp or S-Corp) and Limited Liability Companies (LLC) are the most popular options.
- Getting it all in writing. As a business owner, you really have to be careful what you do and say. Disputes often arise as a result of simple miscommunication. The best way to protect against these legal challenges is to execute solid, well-written contracts for every business relationship. CEO of Building Bridges Consulting, Niquenya Fulbright, had this to share, “In my work as a volunteer professional mediator, I have seen a number of disputes erupt between small business owners and their vendors. Almost every one of these disputes could have been avoided if the agreement had not just been verbal. Shaking hands is great but once the deal is closed, a contract should be drawn up that discloses every detail of the terms and conditions.”
- Protecting intellectual property. Too often we hear news stories about copyright infringement and stolen ideas. The internet makes these legal challenges even more prevalent with the ease of anonymous sharing. According to Amber Johns of Jackson Corporate Law Offices, “The goodwill associated with a company’s brand is a core asset of that company, many small businesses fail to adequately protect their brand before building it and increasing their brand value. This error can result in large economic loss when the lack of trademark and/or copyright protection forces a company to rebrand.”
- Complying with employment laws. There are many employment laws set in place at the federal, state, and local level. These laws govern everything from fair hiring practices to employee interactions. These laws also make the important distinction between an employee and contractor, a big issue that often results in huge fines to business owners who misclassify. If you don’t have a dedicated human resources professional to address legal challenges in employment law, you will need an interim plan to remain compliant.
- Mitigating against risks. Bad things happen to good people with even better intentions all the time. Business owners must go through the process of identifying potential risks to protect themselves against them. You can mitigate against risks to your business by purchasing the maximum amounts of insurance you can afford. Your insurance policies can cover general liabilities, employment issues, customer disputes, and lawsuits. There is even legal insurance available to give you affordable access to the legal system. Consulting a legal professional is a key investment that any company that is serious about growing their brand should make, not only to protect their brand against legal challenges but also to assure that the company can sustain its long-term success and profitability.
How well are you addressing the legal challenges in your business? Contact us today to book a FREE consultation to assess your risks.