Small businesses have a lot to deal with and while saving money is important, it is equally as important to understand the mistakes that can end up costing you more in the long run. The following are some of the most common legal mistakes small businesses make, so make sure you avoid them:
Choosing The Wrong Structure
A lot of small businesses choose to be sole proprietorships meaning there is no legal distinction between the business and its owner. When an owner assumes all the liability of the business, their personal assets like their house or car can be seized to pay any debts the business incurs. Incorporation is worth considering because the business will become a separate entity under the law, so if your business were to incur a large debt, the business’s assets would be seized, but your personal assets would be protected. It’s important to weigh the advantages of each option so that you choose the right business structure.
Forgetting To Put Key Agreements In Writing
Verbal agreements cannot always be enforced, so it is a must that you put key agreements in writing by having them properly drafted. Outline each party’s roles and responsibilities and clarify every detail because this will provide your business with the protection that it needs against future liabilities and risks. This will allow everyone to be on the same page, and if something were to go wrong, you would be able to refer to the written agreement to prove who’s at fault.
Failing To Have Properly Drafted Employment Agreements In Place
It is extremely important that every small business have adequate employment agreements as these will outline the business’s relationship with its employees. You must clarify whether the position is permanent or temporary, whether they are an independent contractor or an employee in the traditional sense and must state all of their duties and responsibilities. You should also include rights and restrictions upon termination so that there are no gray areas.
Failing To Register Intellectual Property Rights
This refers to the legal right to ideas and inventions in the scientific, literary, industrial and artistic fields. It protects symbols, images, names and designs, and there are four types of intellectual property rights, including trademarks, patents, copyrights and industrial designs. Legal protection is required because small businesses create valuable intellectual property assets all the time, and this will prevent competitors from imitating your products.
Not Having A Lawyer On Your Side
Good legal counsel is very valuable, and every small business should hire a good lawyer because they will help you avoid mistakes. Some businesses ignore this aspect to save money, but certain legal mistakes will cost you more in the long run, so it’s important that you consult with a lawyer.
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