No one provides you with a manual to study when you start a small business. You need to grasp essential legal principles about contracts, employment, taxation, employee benefits, and other concerns that emerge in business.
Small business owners must understand when an action relating to their firm necessitates the assistance of a lawyer. Like studying the driver’s manual, you must come to a complete stop while approaching a red, octagonally shaped sign. The seven crucial legal suggestions that follow can assist you in determining when to seek assistance from a business law professional.
1- A verbal contract can be just as legal and binding as a written one
Contracts are the lifeblood of a company. Each time you contact a supplier and request delivery of products, you form a contract. The contract is as legally binding as a 15-page written and signed contract. The issue with verbal agreements is demonstrating what the parties agreed to if it becomes essential to enforce them in court. Written contracts help resolve disagreements over the parameters of an agreement.
- Contracts for the sale of products valued at $500 or more.
- Contracts for the sale or transfer of the real estate.
- Contracts that are unable to be entirely performed and completed within a year.
- Contract rules differ by state, so consult a business law attorney about formalizing commercial agreements.
- Choose and incorporate a business entity.
2- Determine your Businesses Structure
When starting a business, the first thing you should do is determine the structure of your enterprise. The following are the most prevalent business structures:
- Sole proprietorship.
- Limited liability business (LLC).
The structure you choose will impact how you make decisions. It affects how you pay taxes and the extent to which owners are personally liable for the business’s debts and liabilities. For example, a sole proprietorship is simple to establish and maintain. However, the owner’s assets may be confiscated to meet business-related liabilities. Consult an attorney to determine the optimal structure for your business.
3- Take measures to safeguard intellectual property
Developing your business’s name and logo into a brand that attracts and retains customers requires time, effort, and financial investment. However, that can be lost if you use the name and logo without your permission from another business. This is just one example of the critical nature of safeguarding your intellectual property rights through patents, trademarks, and copyrights.
A consultation with an attorney can help detect and address intellectual property difficulties before they become a problem. For example, an attorney can verify whether the logo design violates another company’s trademark before they sue you.
4- Protect Data
Your business is legally required to safeguard the personal information it collects from website visitors, customers, and employees. State and federal laws require your organization to protect all data it collects from cyberattacks. Additionally, the regulations force firms to post privacy notifications and impose penalties on those that do not comply.
Before engaging in any activity involving collecting personal data from or about an individual, you should seek legal counsel. This ensures that the action does not breach the law. For example, a policy of ordering credit checks on all new employees violates federal law. You can only do this if you have the individual’s agreement.
5- Maintain separate corporate and personal financial accounts
Personal liability protection offered to owners by forming a corporation or limited liability company as a business structure may be lost. This happens if you use corporate bank accounts and credit cards to cover the personal costs of the business’s owners. Consolidating personal and commercial funds and assets creates legal complications and should be avoided.
6- Ensure to formalize business arrangements with co-owners
The easiest method to avoid disagreements and problems between co-owners is to begin the relationship with a formal, written agreement. The agreement should clearly describe each owner’s rights, responsibilities, and obligations to facilitate the resolution of issues. Issues usually emerge throughout any business operation.
Your attorney may offer suggestions for the agreement’s content. For instance, the attorney may consider establishing a mechanism to address removing one of the owners from the firm.
7- Consult with and adhere to the advice of a business law professional
See a business law professional as soon as you begin seriously considering launching a small business. An attorney assists you in anticipating potential legal concerns. They advise you on how to resolve them before they become a problem.
Once you have covered the legal side of the business, you will be ready to face every obstacle head-on. Failure to obtain legal advice leaves any business vulnerable to the unknown. Therefore, legal representation is a best practice no business should operate without.