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Protect Your Small Business from these Legal Issues

Running a business is no child’s play. Things will often become more challenging and complicated as you strive
to expand and grow your business. Of all these, legal challenges are usually the hardest to deal with, ranging from simple paperwork issues to matters of liability or litigation with clients and customers.

Getting the legal aspect of your business straight is not fun, but neither is having to be dragged to court to either face a judge or jury. So while you are busy with crafting strategies to grow your business, you should be sure to pay special attention to potential legal issues your business may face or is vulnerable to.

The following lists out a few problematic areas your business might be vulnerable to in the future:

1. The Right Business Structure:
In the early stages of establishing your small business, you should carefully consider what setup or structure your business should follow; should it be a partnership (or limited partnership,) sole proprietorship, LLC or corporation?

Many business owners fail to determine what the correct legal structure for their company should be. This can at times lead to further complications further down the line. Issues of liability, double taxation, penalties and more are just some of the potential issues a business owner might face down the line.

2. Shareholding of a Business:
Depending on the size and ownership structure of the company, there may be several shareholders or owners of the company.  The higher the number of owners, the potentially more complex things can become during the day to day running of the business. The one thing that can very likely limit or remove this complexity is having a well drawn-up shareholders agreement (for a corporation) or an operating agreement for an LLC (for an LLC.)

Having a well-drawn up agreement most likely means that you will need a business or contract lawyer draw up such contract, as it will have to cover a wide range of possible scenarios such as if a member or shareholder dies or leaves the business, their ability (or inability) to sell or transfer their shareholding to a rival company, how conflicts will be resolved, voting powers of members, among many others.

3. Issues of Intellectual Property:
Issues of intellectual property arise when a business uses a property that is covered by one type of intellectual property protection or another, such as a trademark, copyright, trade secret or patent.

Sometimes this violation might be unintentional and sometimes it might be willful. Whatever the case, such actions can often have consequences of a legal nature. The worst case scenario is that a business might be slapped with a lawsuit for such IP violation.

Not all intellectual property cases necessarily get taken before a court, however. Many of them are resolved by simply paying a fine of some sort to the IP owner. In some cases, you might be able to settle this matter directly with the party who owns the IP. In others, you might have no choice but to seek legal help and advise.

4. Business Insurance:
While not an absolute necessity, business insurance, or a lack of it, can easily prove to be an important issue that can affect or even cripple a small business. Business insurance protects a business from any financial liability that it might incur in the course of carrying out its daily activities. The need for such insurance might perhaps be justified by the research that points to the high incidence of litigation among small businesses in any given year.

5. Tax Issues:
One of the last things a business owner wants to do is have a run-in with the IRS at the federal level, or any other relevant local state tax laws. Doing so can leave your business at the mercy of local or federal authorities. Not paying your business’s taxes or incorrectly filing your employees as contractors or vice versa, are just some of the issues you can face that can leave you liable to penalties and in worse case scenarios, possible jail time.

6. Miscellaneous Issues
Small businesses often face other issues related to their business that, while it may not necessarily be a legal issue, it may require legal intervention of some sort.

Here are a few useful tips to devise a legal strategy for your business:

  • Have or set aside a budget for legal expenses: There are of course a number of factors that need to be considered in this regard, but it always helps to be prepared to face any legal challenge that comes your business’s way. While you may not be big enough a company to have your own in-house counsel, one good workaround to that is to find and establish a relationship with a law firm or commercial lawyer that you can call up at any given point in time that you have any legal issues, or just need legal advice.
  • Make sure you select and work with the “right” attorney. Yes, we realize that the word “right” is relative, and will likely differ from person to person and situation to situation. But a good starting guide is to ensure that the attorney you are considering retaining is knowledgeable in the industry in which your business operates.
  • After all is said and done, even though you might be going through a legal challenge in your business, it is important that you keep one foot on the pedal of your business and not be too distracted by the legal challenge. If and hopefully when you overcome the legal challenge, you want to be sure that your business would not have been neglected to the point where the viability of the business would have been put in jeopardy because of the legal challenge.

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