10 Legal Questions Small Businesses Don’t Always Know to Ask

10 Legal Questions Small Businesses Don’t Always Know to Ask 
By Charles Bowen

Owning a small business is an exciting endeavor, particularly when it means turning your passion into an income-generating career. But as almost every entrepreneur learns somewhere along the way (often painfully), being a business owner, unfortunately, does not make you a legal expert.

Attorney Charles Bowen, Founder of The Savannah Film Alliance and Southern Gateway Production Services

Attorney Charles Bowen, Founder of The Savannah Film Alliance and Southern Gateway Production Services

I’ve worked with small business owners for well over twenty years now and helped them manage corporate compliance issues, intellectual property laws, contract disputes, state and federal regulations, litigation, and countless other unexpected legal hurdles. As a result, I wanted to share the answers to ten questions that small business owners often don’t know to ask until it’s too late:

1. Do all of my agreements need to be in writing?
Keeping track of every transaction and conversation may be tedious, but it is crucial to your company’s success in the event of a dispute. Whether it’s contracts with your customers or just a receipt for merchandise, written records greatly reduce your liability and can serve as winning evidence if a disagreement arises. Even a simple email memorializing a conversation can make the difference between legal victory and a costly defeat.

2. How can I avoid getting sued?
Knowing and addressing the most common risks of your industry can greatly reduce your risk of getting sued. Lawsuits can arise in many areas, such as employee complaints, accidentally infringing on someone else’s intellectual property, and failing to meet all state and federal regulations for operation. The first step is to recognize where your company is most at risk and then taking steps to minimize that risk as much as possible.

3. What impact will investors have on my business?
Investors can be a great source of the capital, knowledge, and connections necessary to grow your business. However, it is important to remember that every investment also brings added duties to the investor and reduces your autonomy as the owner. Be sure to that your investment agreement is clear and comprehensive, and that you are not ultimately giving up more than you are receiving.

4. Can I use my personal assets to operate my business?
One of the most common and devastating mistakes made by small business owners is blurring the line between personal and business assets. It is crucial to keep them separated. When you are transferring assets, pay yourself with the same company checks you use to pay your employees. Remember: if you treat your personal and business assets as one and the same, then creditors and courts can do so, too.

5. What can I do to protect my brand?
Regardless of industry, the most important assets of any business are its name and reputation. That’s why making certain your brand is protected is an extremely important part of any business plan. Be sure to register trademarks for your brand name, logo, and other important identifiers of your company. Registering can also help you put a stop to any competitors infringing on your intellectual property.

6. Should I incorporate or operate as a sole proprietor?
If you do not form a formal business entity, you are placing all of your personal assets at risk. To prevent this scenario and limit your personal exposure, you can form a corporation, limited liability company, limited liability partnership, or a limited partnership. Review each structure and how each will affect the way your business is owned, managed, and taxed. Then choose the style that best suits your vision.

7. How can I foster a good work environment and limit my risks as an employer?
Rule one: don’t be a jerk. Now that we have that out of the way, another very effective way to ensure a good relationship with your employees is to create a comprehensive company policy and procedure manual. Knowing the rules (and knowing they will be followed) allows all employees to feel valued, protected, and secure. In addition, stay informed on all federal and state employment laws that affect your business, including anti-discrimination laws, health and safety regulations, wage and hour laws, and licensing requirements.

8. What should I do if I get sued?
The unfortunate reality is that the more successful you are, the more likely you are to get sued at some point. More success means more employees, more customers, more transactions, and inevitably more complaints. If you do get sued, follow three simple rules: (1) remain calm and do not respond in anger; (2) gather together all of the documents and other evidence in your possession related to the lawsuit; and (3) contact your insurance company and/or attorney immediately. If you follow these simple steps, most lawsuits can be resolved quickly and easily.

9. What contracts does my business need?
Well-written contracts protect your company by clearly defining the responsibilities of both parties. They help avoid disputes, make sure you get paid, and provide a clear remedy if one side fails to fulfill their obligations. For most small businesses, I suggest preparing a form agreement that you can use repeatedly and that includes all of the important protections that your company needs. If you operate online, it is also important to make certain that your website includes written disclaimers, terms of service, and privacy policies.

10. Do you have all necessary licenses and permits?
Be certain to annually monitor all federal, state, and local licensing and permitting requirements related to your industry. One very easy way to determine your requirements is to simply visit sba.gov. This website allows you to simply enter your zip code and business type, and it will generate a list of required licenses and permits.
Following these rules can go a long way towards protecting your small business from legal snafus and lawsuits. There are many online and community resources for small business owners that can be of great assistance.

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