5 Common Legal Issues Small Businesses Face

Starting a small business is an exciting venture filled with risks and rewards. It takes a great deal of courage, hardwork and determination to follow your entrepreneurial dreams. But when you’re too focused on financial matters, you might lose sight of other aspects of the business.

One of the essential elements of running a successful small business is staying on top of legal issues. From registering your business to hiring employees, there are a multitude of legal requirements that small business owners must navigate. 

Let’s explore the five most common legal issues small businesses face and provide some helpful tips to stay ahead of the game. As an initial piece of advice, make sure to get free legal advice only from reputable lawyers.

1. Formation and Registration

For starters, you need to choose the right legal structure (i.e., sole proprietorship, partnership, limited liability company or corporation) and register your business with the appropriate authorities. Without a professional to guide you, this can be a confusing and overwhelming process, especially for new business owners. 

Note that each structure has its own advantages and disadvantages, depending on the business’ size, industry and financial situation. Once you have chosen the right legal structure, you must register your business. You’ll need to file the necessary paperwork, obtain tax identification numbers and register for any necessary licenses and permits. 

2. Contracts and Agreements

Contracts are legally binding agreements between two or more parties that outline the terms and conditions of a business transaction. A poorly written contract can result in misunderstandings, disputes and even lawsuits.

Whenever you enter an agreement with another party, see to it that you have a clear and concise contract that outlines the expectations and obligations of all parties involved. Some common contracts small businesses may encounter include employment contracts, non-disclosure agreements, lease agreements and vendor contracts. 

It’s crucial to have an experienced attorney review any contracts before signing them to ensure that they are legally binding and protect your business’ interests.

3. Employment Law

Hiring and managing employees involves complying with a wide range of laws and regulations, including minimum wage laws, anti-discrimination laws and employee benefits laws.

One of the most important employment law issues for small businesses is the classification of workers as employees or independent contractors. Misclassifying workers can result in legal penalties, fines and back pay for unpaid wages and benefits.

4. Intellectual Property

Intellectual property refers to creations of the mind, such as inventions, designs, symbols and literary and artistic works. Protecting your business’ intellectual property is essential to preventing other parties from copying or stealing any of your ideas.

Patents, trademarks and copyrights are examples of intellectual property protection. You’ll need to consult with an experienced intellectual property attorney to determine which type of protection is right for your business.

5. Taxation

Navigating federal, state and local tax laws isn’t exactly second nature for new business owners. But the thing is, failure to comply with tax laws can result in fines, legal penalties and worst, business closure.

Seek a qualified accountant or tax professional to ensure your business complies with all tax laws and regulations. They can help you navigate tax requirements, prepare tax returns and advise you on the best tax planning strategies.

You see, even the smallest of businesses are met with a lot of legal responsibilities. As the business owner, you need to stay on top of all legal issues that your business may face. To make sure you comply with all relevant rules and regulations, it’s always best to hire an experienced lawyer like the ones from Brydens.

Christopher Stern

Christopher Stern is a Washington-based reporter. Chris spent many years covering tech policy as a business reporter for renowned publications. He has extensive experience covering Congress, the Federal Communications Commission, and the Federal Trade Commissions. He is a graduate of Middlebury College. Email:[email protected]

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