There are many different common legal mistakes that businesses make. However, the most common ones include the following:
1. Not Choosing the right business structure
There are various business structures that have benefits and drawbacks. These business structures include sole proprietorships, partnerships, corporations, S corporations, and LLCs. You just have to weigh out the pros and cons of each structure to see which one works best for your business.
For instance, sole proprietorships may have lower taxes. However, sole proprietorships are considered to be one and the same with you and your business. Thus, if your business is sued, you will be at risk of losing your personal assets.
Not being a legal entity means the potential of having higher legal risks. Without a corporate business structure, every co-owner may be liable as to their personal finances if the business is sued or goes out of business. Being incorporated greatly reduces the risks of being personally liability.
2. Not Protecting Your Intellectual Property
One of the worst legal mistakes that small companies make is to not protect their intellectual property. Any individual, brand, or corporate entity may be able legally infringe on your intellectual property, if your intellectual property is not protected.
It is imperative to protect your intellectual property carefully and creatively. If you don’t, you may be required to spend a lot of money to protect it down the road. To do this, you must first identify which aspects of your products and business need protection by trade secret, patent, copyright, or trademark.
There are various procedures to protect your intellectual property. Having a good business lawyer will ensure that your brand and products will be protected and avoid legal problems down the road. Your lawyer will help you research if someone already has exclusive rights to the products or brand names that you want to develop.
3. Using Personal Accounts to Store Company Revenue
Mixing personal accounts with the company revenue is more serious than many small companies realize. By doing this you may expose yourself to being personally liable and may create problems with the taxing agencies.
4. Not Obtaining Non-Disclosure Agreements (NDA)
When you fail to obtain non-disclosure agreements, you are putting your business at-risk in different ways. You are allowing your employees, service provider or others to share your sensitive business information, your trade secrets and customer lists with others.
5. Incomplete or Inappropriate Contracts with Vendors
You must have very clear contracts when purchasing goods or services from an outside vendor. Free internet sites do not have solid contract templates. To ensure that you have solid contracts, you will need a good business law attorney to draft them.
Starting a small business is exciting. With all this excitement, it is imperative to not overlook the legal aspects of your business.
Not using a corporate attorney is a mistake. It can cost your company a lot of money now and down the road. Many partnerships and solo proprietorships make a huge mistake by thinking that they don’t have many of the same legal obligations that a larger business has. They think that legal issues only arise when they scale, but this is not the case.
Before launching your business, hire a good business law attorney with a proven track record. Even if you have already launched your business, it is still important to have a good business law attorney. By doing this you can eliminate potential legalities that may cost you a lot of time and money down the road.