Small Business Legal Mistakes to Avoid
Small business owners make legal mistakes all of the time, which often results in the downfall of a company. Without the proper knowledge, business owners find themselves repeating the same mistakes. The SBA (Small Business Association) stresses the importance of ending the circle of disastrous legal errors by investing in Continuing Education business courses, or by hiring a business consultant.
There are many resources for legal advice and information available on the Internet. If you think that you need professional legal advice consulting a lawyer is the best course of action. But here are a few common legal issues that you may come across.
For most business transactions you want to create and sign a contract. Contracts or service agreements allows you to define what your services or products entail. Service agreements are an important way that you can protect yourself and your business. Don?t overlook this important aspect of small businesses.
Your service agreement should definitively state exactly what you?re agreeing to do and the specifics of that. It should detail the definition and scope of your service. You should also define what is not included in your service and if any extra charges may be applicable. Don?t leave anything out.
Employment Termination? To keep overhead costs down, a major percentage of small businesses begins with a low number of employees. Staff members come and go, as business growth changes. It makes no sense to keep staff on the payroll if the business can?t support the wages.
In order to avoid unlawful discharge law suits carefully select your employees and read up on the proper procedure for terminating employees. This may be a situation were you should immediately contact a corporate attorney.
Since labor taxes can be so high many small business owners choose to hire independent contractors. Independent contractors are required by the IRS to claim and file themselves. You may think this makes things much easier on you.
Use extreme caution assigning tasks to the company?s IC?s. Some projects can change the status of an IC to an Employee in the IRS?s eyes. If you?re uncertain as to what jobs classify as IC or Non IC status, visit your local state website or www.sba.gov for more information.
If you own a small business with someone else you need to know about the legal definitions of your partnership. If you?re a sole proprietor this means you own the business yourself and can be held legally responsible for anything to do with your business.
Start a business as a L.L.C. (Limited Liability Corporation) instead. This will eliminate the risk of loosing personal funds due to allegations in a lawsuit.
Intellectual property issues should be of great concern to any business no matter what sector you are in. This means you need to understand copyrights, registered trademarks, invention assignment agreements, and confidentiality agreements. Protect your company and its property.
Record Keeping ? Improper record keeping can cause serious problems. Accurate accounting records are essential if the IRS is the least bit suspicious about the company?s financial records. Invest in a bookkeeper or an accounting program to make it easier to keep account of your daily transactions. Also, organize files to be readily accessible in case of an IRS audit.
If you can?t afford to hire an accountant there are many bookkeeping software packages that can make things easier on you. Be sure to keep all of your paper documents as well since they may be necessary should you be audited.
At some point you may need to consult with an experienced corporate attorney. While most attorneys do charge a high fee, there are many situations where it may be necessary to do so. Sometimes there?s no substitute for professional advice.
Choose an attorney that you?re comfortable with and can afford. It is important to build a relationship with your attorney so that in times of need he or she will better understand your situation.
If it anytime you feel in over your head, consult with an attorney. Business owners can get themselves into very serious trouble without the proper legal knowledge.
About the author: Vlad Ehrsam is the chief writer at Full Info on Business, it's one of the webs most up to date Business sites, while you're there sign up for the free newsletter.
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