Starting a business can be exciting and exhausting at the same time. There are so many things to deal with that entrepreneurs sometimes overlook important aspects of the business, including critical legal processes. However, when the law is concerned, it’s best to stay prepared. For small businesses, legal mistakes can be extremely costly.
Here are the 5 legal mistakes often seen in small businesses:
1. Business structure:
Setting up an appropriate structure for the business should be a priority. Unfortunately, many small business owners delay this task until it’s too late. These business owners can lose out on deals with outside investors, because their business is not set up as a corporation. They can also get in serious troubles in case of a lawsuit against their business.
Setting up an LLC or a corporation is often recommended. It will provide personal liability protection and help keep personal and business matters separate. This should be prioritized, regardless of the size of the business.
2. Contracts with unfavorable terms
Once the business is set up, there will be a lot of contracts to sign. This includes the contracts with clients, suppliers, vendors, partners and other parties.
With so many things on their plates, some business owners have the bad habit of skimming through the contract. To avoid confronting the other parties, sometimes they agree to terms that are less favorable to their business. Such negligence can lead to serious consequences in case of a dispute.
Therefore, as a business owner, it is crucial that you go over all the contracts carefully. When in doubt, have a legal expert review your contract to make sure it is fair for both parties.
3. Intellectual rights
If your business’s survival depends on an innovative product or any intellectual property, take every step needed to protect that very core factor of your business. If you plan to invest so much money and effort in building a brand name, then it needs to be protected as a trademark. It may sound simple, but many small business owners do not think about it until it’s too late. Getting a patent, trademark or copyright is essential to protect your business.
Some insurance are required by law, such as workers compensation and builder risk insurance. But having insurance to meet the minimum legal requirement is not enough. Small business owners also need to determine if they have adequate insurance to cover unexpected damages to their properties. Not having adequate insurance can be one of the most costly legal mistakes in case of unfortunate events.
A common mistake that small business owners make is miscalculating wage payments. This can include illegal deductions for cash shortages or uniform costs, inadequate overtime compensation, and mishandling tips. Make sure to get a good understand of the wage laws. Also note that all payroll tax needs to be remitted to government agencies.
Many businesses make these legal mistakes because they did not have access to affordable legal protection. LegalShield, therefore, strive to help small business owners and entrepreneurs gain legal protection at a low cost. Contact a LegalShield consultant today to learn how you can get legal advises, services, and protection for less than $1 a day!