Small businesses can definitely face their share of legal troubles. While it probably varies across the board, here are the three that I think are the most common problems that small businesses face:
- Choosing the Wrong Business Formation
Because small businesses, are well—small, many owners make the mistake of filing their business as a sole proprietorship. The problem with that is that it exposes you to personal liability if your business is ever sued. That means, if your business ends up being financially responsible, then your own money and assets could be up for grabs. Instead, if you file for as a Limited Liability Company (LLC) then you personal funds are protected. It’s worth looking into if you aren’t sure if you formed correctly.
2. Failure to Protect Intellectual Property
Somewhere along the way, small businesses seem to have got the impression that IP is only a “ big business” problem. This is so far from the truth. Numerous small businesses have developed some pretty incredible inventions that are worthy of IP protection. But, because small businesses make the mistake of not filing any sort of patent or trademark, larger businesses with more ability to develop can come in and steal those concepts. It’s unfair and totally avoidable. If you have intellectual property—protect it. You’ll thank yourself later.
3. No Employee Contracts
Even if you only have one employee—do not skimp on employee contracts. These contracts may feel like a formality, but trust me—you will be glad you have it if you ever have to go to court. An employee contract should outline things like pay, benefits, expectation and rights and responsibilities. It takes out the guesswork if an employee fails to hold up their end of the bargain. Plus, it’s a safeguard for employees, too. Not only will it make your business feel more legitimate, but you’ll have a bit of protection if things go sour.
Small businesses can certainly have their fair share of legal trouble, but some of it could be avoided with a bit of legal planning. If you would like more information for how to protect your business, check out my companyWe have helped business owners just like you with everything from formation to contracts, and everything in between! We strive to make legal services more accessible and affordable so businesses big and small can get the help they need without breaking the bank. Take a look at our site, and get in touch if we can help.