Starting a small business requires considerable effort and investment of the entrepreneur, wherein amidst all the hard work, it is common for small business owners to overlook some legal aspects, leading to potential legal pitfalls. Ignorance of such legal aspects can cause substantial financial and reputational risks to small business owners. In this article, we will discuss some common legal mistakes committed by small business owners.
Not Protecting Intellectual Property: Small business owners tend to overlook protecting their IP, which might cause them to lose significant revenue. Trademarks, patents, and copyrights are essential for protecting intellectual property. Violating these laws can lead to expensive legal suits that can cost the business financially as well as impacting its reputation. Therefore, investing in these protections should be seen as an investment in the company’s future success.
Not Adhering to Employment and Labor Laws: Small business owners must comply with all local, state, and federal labor laws, including minimum wage laws, safety regulations, insurance requirements and work hours in their respective industries. Failure to comply with these regulations may result in penalties, civil suits, and loss of reputation.
Not Having Adequate Contracts and Agreements: Small business owners may see contracting and agreement negotiation as a time-consuming process, but without these formalized legal agreements, the company’s business dealings with suppliers, customers, partner businesses and employees are at risk. These should include not only contracts for suppliers and customer interactions, shareholder agreements, employment contracts, worker, independent contractor agreements, licensing agreements and partnership agreements.
Not Having Insurance: Business insurance is not merely a simple thought or a consideration, but it is a legal requirement for starting and sustaining any business. Failing to secure adequate insurance for the business can lead to a severe financial burden in case of unprecedented events such as natural disasters, liabilities lawsuits, theft etc. It is necessary for small business owners to invest in appropriate coverage for protection and to avoid costly litigation.
Not Keeping Accurate Financial Records: One substantial legal requirement for small businesses is maintaining accurate financial records, which is fundamental to ensuring the long-term success of the business. Complying withfinancial record maintenance and disclosure requirements under federal, state or local regulations, including recordkeeping and reporting requirements this way you can have a clear and fair basis of accounting and reporting, hence avoiding legal troubles like tax issues and legal suits.
In Conclusion, knowledge, and compliance with local, state, and federal laws should be a priority for every small business owner. While there may be other laws specific to the particular industry of the business, owners can avoid common risks by adhering to the laws mentioned above law. Once businesses have mirrored their legal compliance with the laws, they can then focus on growth and expansion. Hiring a legal professional on a contractual basis or full-time basis can greatly reduce the legal risks the company can face, and can also protect the organization in the long run, enabling the business to grow and flourish.