The 8 Biggest Small Business Legal Mistakes You Can Easily Avoid

You don’t want to deal with legal. We get it. If you wanted to, you would have become a lawyer, wouldn’t you?

So, we have some bad news and some good news – legal is a part of doing business and you can’t avoid it, that’s the bad news. The good news is that after years and years of working with startups and entrepreneurs we found out what are the

8 Biggest Small Business Legal Mistakes

We also tested what are the best ways to avoid them (to not deal with them at all) so you don’t need to know more business law than you really have to.

1. Not copyrighting your business.

Your business name, logo and product need to be protected by law. There are so many scams these days that even copyright and trademarks can’t stop them but at least you can prove you are the owner of original design.

How to avoid: First, make sure that the URL for your chosen name is available. If not, choose another name. Then make sure you register all of you business specific design as a trademark. These are the basics. If your business has unique features or products, it’s best to consult a lawyer for taking care of them.

2. Not protecting the customer data on your website.

Oh, this one can get ugly. Your customers and website visitors might say they love you on social media but they are just waiting for the right opportunity to file a lawsuit against you for distributing their personal information.

How to avoid: Have a privacy policy on your website and use professional data storage services that are legally bound to keep your information safe.

3. Not having employee documentation.

This mistake has cost so many businesses hundreds of thousands of dollars. Without proper employee documentation it’s your word against theirs and the employee wins almost 100% of the time.

How to avoid: Just know employment law from day 1 of your business. Get a book, go to a seminar or workshop or schedule a meeting with your lawyer but do your homework.

4. Not choosing the right business structure.

When you first start a business, you have no money, no experience and no desire to go deep into legal and taxes. That’s why you choose a sole trader structure. Then you go find out you can never grow a business to a multinational with this business structure.

How to avoid: Weigh the pros and cons of all business structures before starting a business. Go to a small business legal course or contact your local entrepreneurship office for advice. If it’s already too late consult your lawyer about starting a new company.

5. Not getting all licenses and permits.

This is a huge mistake. You might get your business closed before you can even pay off the equipment you purchased.

How to avoid: When getting a business license, do industry-specific and location research to find out what additional permits you might need. If you are just starting a business you can easily avoid this mistake by taking a startup workshop or law for non-lawyers course.

6. Not having a partnership agreement.

This is strictly partnership-specific mistake but we see it so often that we had to include it. The thing is that more often than not partners are friends or family members that think they do not need a partnership agreement. However, this is a business started without the base. It will get you in trouble when you want to exit the partnership, welcome new partners or when you find out your partner has a bunch of personal debts.

How to avoid: Just have partnership agreements. In writing. If it feels weird to ask your sister to sign one, tell her your lawyer is requesting it and it is just a formality. (make sure you actually have a lawyer to put this one on)

7. Not having standard contracts that benefit the company.

Many small businesses draft contracts as they go or accept the other side’s contract draft without much thinking. This has two main issues – you don’t pay attention to the contract as much (who has time for that?) and the other side will always have a contract that benefits them.

How to avoid: First, learn the contract law fundamental so that you can easily recognize contracts that are not beneficial for your business. Second, no matter how big your business is, work with a lawyer to have standard employee, client, supplier and partner contracts drafted. Then adjustments are easy to make.

8. Not asking for legal help.

We know that your job is not to know the details of legal but to change the world with your business idea. Ignoring legal issues won’t help with that; it will only slow you down. Don’t read legal books, just call a lawyer at the first sign of trouble and sleep with a peaceful mind.

How to avoid: If you don’t want to know law, at least know when to call your lawyer. You can easily get legal-smart with a short startup legal course or workshop.

Did you already make any of these BIG legal mistakes?

No worries!

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