How To Protect Your Business From Legal Calamity

   Small businesses make legal mistakes all the time — some of which can be disastrous and difficult to recover from. Follow a few simple guidelines and avoid legal problems with your business.

  1. Choose the right business ownership structure – The business structure you choose depends on the type of business you are in, how many owners you have and its financial situation. Proper ownership structure protects you from higher tax obligations and litigation that can affect both your business and personal assets.
  2. Have the proper partnership or shareholder agreements – Every business should have a shareholder agreement for Corporations, or an operating agreement for Limited Liability Companies that would include rights to employment, voting rights, withdrawal rights and buyout clauses, as well as Buy-Sell provisions. Every contingency should be planned for so that in the event of a dispute, the business need not dissolve.
  3. Understand when to sue for past due amounts – Depending on the size of a claim, the client’s ability to pay, or the client’s likelihood of countersuing, it may not be worth it for you to sue for past due amounts.
  4. Seek legal advice before a dispute becomes a  lawsuit - Laying the groundwork to win a lawsuit takes place at the very beginning. Having the necessary information to prove your case at the outset will provide an edge when you eventually go to court.
  5. Have all the necessary licenses or permits – Depending on what type of business you plan to engage in, you may need a variety of licenses or permits. At a minimum, you will need a business license and tax registration.
  6. Meet all zoning requirements – When you are selecting the location for your business, you will need to make sure it is properly zoned for the type of business you plan to operate. Even if there is another business of the same type is in the area, zoning may have changed while the other business was operating, and that business may have been provided an exemption that would not apply to you.
  7. Understand the terms of your commercial lease – Commercial leases can be complex and have clauses that will have large financial consequences that you may not be aware of. Leases often include repair and maintenance obligations, assignment, subletting and insurance provisions and personal guarantees.
  8. Have proper insurance coverage - If your small business is underinsured, you could be jeopardizing your small business' future. In the event that you are sued, you must have the necessary property and liability insurance.
  9. Keep proper corporate records – Improper record keeping can cause problems with the IRS, hamper your ability to raise equity capital, and result in personal liability.
  10. Protect your intellectual property – Intellectual property consists of items that you have created that are unique and that provide you with an economic benefit. They include inventions, designs, original works of authorship, and trade secrets. Depending on what type you have, patents, copyrights or trademarks are used to protect these.
  11. Have all your business agreements in writing – Oral agreements are often difficult to enforce in court and may not be enforceable at all.  Most agreements should be in writing even if the law doesn't require it. A written agreement clearly spells out each party's rights and obligations in case of confusion or disagreement.
  12. Do not write contracts with customers or vendors yourself – Contracts and agreements related to your business can be complex, need to have certain wording and need to be very clear. Vague, incomplete contracts will fail to protect you and your business.
  13. Seek legal advice before you make any important decision that could lead to litigation – Unnecessary litigation should be avoided whenever possible whether you are the one initiating the suit or someone else is. If you have a dispute with another party, do not communicate directly with the other party. Your words and actions can be used against you.

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Comments: 2
  • #1

    Wilber Ruhland (Sunday, 05 February 2017 00:26)

    Awesome site you have here but I was curious if you knew of any community forums that cover the same topics discussed here? I'd really like to be a part of group where I can get feedback from other knowledgeable individuals that share the same interest. If you have any recommendations, please let me know. Thanks!

  • #2

    Bethany Coombs (Monday, 06 February 2017 04:49)

    This is a topic that's close to my heart... Many thanks! Exactly where are your contact details though?