In business law there are a few “urban legends” that have ruined more than a few promising businesses. Each smart entrepreneur needs to learn the legal facts behind the accepted believes to avoid embarrassment, going to court and spending a fortune on lawyer fees.
A short research online for “business legal facts” can turn your whole life into a swirl f contradicting statements. And this is even before visiting some business forums where everyone seems to be the “legal expert”.
Well, they aren’t. And you aren’t.
But that’s okay because you aren’t supposed to be.
It’s okay to hire a lawyer in-house or consult one whenever you feel the need. However, it’s not okay to believe false statements that everyone claims for true because they can ruin your business, cost you a lot of money and break a reputation you have been building for years (see Legal Fact #8).
The only solution we could think of was to gather the most common
13 Legal Facts That Every Smart Entrepreneur Needs To Know
and offer you a list covering the most common false “facts” to watch out for, as a start:
Legal Fact #1 A contract doesn’t need to be a signed agreement
The assumption that unless you sign an agreement, it’s not enforceable by wall, has ruined many business relationships. Some even believe that after you sign you are allowed a cooling-off period in which you can change your mind. This can’t be further than the truth. In fact, an email, recorded phone call, a conversation or a message on social media can be considered a binding contract if all the requirements for such are fulfilled.
Legal Fact #2 A commercial lease is different than regular leases
A commercial lease puts more power in the hands of the property owner not only in terms of payment schemes and maintenance, but it also determines the ways in which you can use the commercial property.
Legal Fact #3 A director’s guarantee is not the norm
If you have been asked for director’s guarantee when signing a lease, taking a loan or purchasing big amount of goods, you might have been told that director’s guarantees are the norm in such dealings. A director’s guarantee is a serious commitment you make with your personal assets and it means that the counterpart doesn’t trust the liquidity of the business entity. Think well and consult a lawyer before signing a director’s guarantee.
Legal Fact #4 A business can recover bad debt without going to court
Many small business owners decide to not pursue debt collection because they think it is either too expensive to hire a lawyer or a debt collector, or simply because they don’t want to go to court. However, collecting your debts is sometimes as easy as sending a Letter of Demand.
Legal Fact #5 Extended warranty might be illegal
Customers crave guarantees for their purchases and are willing to pay a fee for extended warranties. However, before offering such a business owner needs to make sure they aren’t charging for something that the customer is already entitled to. The Australian Consumer Law includes specific minimum legal warranty periods for most goods and services.
Legal Fact #6 Copyright and trademark are very different
Copyright refers to creative work, while trademarks are anything that distinguishes your products and services from competitors. If something is copyrighted, it is not protected by trademark legislations as the two are ultimately different categories on intellectual property protection.
Legal Fact #7 You don’t always need to call the lawyer
Many business owners spend ridiculous amounts of money on lawyers when they can handle issues in-house with a few form filed in the court or to the tax office. And it works both ways – many chose to never call the lawyer and think that the Internet can give them a law degree. You can handle a lot by yourself but make sure you have some legal background like an Essentials Of Business Law workshop.
Legal Fact #8 Online advertising is no different than offline
A common misconception is that online marketing and advertising is not as strictly regulated as offline. Seems like we can say anything online without consequences. This is the reason behind the recent boom in social media lawsuits. The Australian Consumer and Competition Law requires you to refrain from misrepresentation and false claims online and offline alike. It’s not just that but rumors spread like pollen these days and once your false statements are discovered, you might just turn into the next celebrity business that got ruined by social media.
Legal Fact #9 Hiring a contractor might be the wrong decision
Small business owners chose contractors because they seem to be cheaper and easier to manage than employees. Without a binding agreement, nondisclosure agreements and loyalty, however, contractors turn out to be more expensive and complex to manage. They can leave whenever they want and change terms in ways that you wouldn’t like without a contract that works for you.
Legal Fact #10 A partnership agreement in writing can save the business
One of the most ridiculous assumptions in business is that two partners are always on the same page about a company. That might be true but should never be assumed. This is just one reason for a partnership agreement in writing. The more crucial one is that if something happens to one of the partners and he or she is incapacitated the business might need to be put on hold.
Legal Fact #11 The lack of termination agreement is a time bomb
A termination agreement is an employer’s guarantee that an employee won’t change her or his mind about the fairness of the termination. The lack of termination agreement leaves the courtroom door open for lawsuits as former employees see opportunities to extract more money from your business. A termination agreement comforts both sides that the deal is sealed.
Legal Fact #12 Buying prospects is illegal
Online marketing is what we have in mind again – it’s new and innovative and the rules are still not written in ink. However, laws such as anti-spam and communication consent regulations are already taking action. Basically, you can’t contact people with commercial messages unless you have their explicit content (like a double opt-in for email newsletters)
Legal Fact #13 Your personal will is not enough
Having a will is not popular. Because it means we accept that we will die. But every smart entrepreneur knows that a will is not a “come, take me” letter to Death but means of making sure that your affairs are handled in the way you want them to the end surprises them. And because smart entrepreneurs want their businesses to be taken care of, they have a separate business will.
The best way to handle business law is to make sure your sources are more legally savvy than you are. If you are taking business legal advice from blogs with questionable authors or other business owners with zero legal background, you should watch out.
In the Internet age, anything can pass for a fact if it’s written with huge letters online. Don’t be mislead to think that everything that makes sense is the law.
Sometimes the law doesn’t make sense. That’s why you need to be informed on legislations and work with facts, not urban legends.
We sincerely hope that none of those 13 legal facts turn out to be fatal for you and we have warned you in time. If not, we will be happy to help you sort out the mess.
If you have been lucky and smart enough to not believe any of those myths, it’s time to create your own luck and get a little bit informed.
A legal mistake can be costly and a real pain for your business and even cost you a lot of embarrassment.
If you want to take your knowledge of business law one step further to really work with the facts and use them to your advantage, follow Aquarius Education on Facebook, Twitter and LinkedIn so you can be the first to hear about our upcoming Essentials Of Business Law workshops.
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