Entrepreneurs and small business owners are passionate, driven, and generally busy people. They are focused on many things, probably the most important being the everyday struggle of running their business.
In the frantic haze of starting a business most focus on everything but the legal considerations of operating a business. The business, no matter, how successful can be brought down by the failure to comply with or understand the laws. Below is a basic list of 8 things every business owner should know or consider.
1. Not using an attorney when forming the business
Some Entrepreneurs hold a belief that they do not have the same legal obligations that bigger businesses have. This is false. Most laws do not differentiate between small and large businesses. However, just because you should involve an attorney in the beginning of your business doesn’t mean you need a large amount of legal work. Sometimes all is needed is a consultation and a lawyer to bounce ideas with.
2. Choosing the right legal structure
There are sole proprietorships, LLCs, S corporations, partnerships, and corporations. Choosing the right one means understanding the benefits and drawbacks of each. For example, if you set yourself up as a sole proprietor, you must understand that you and your business are considered “one” in the legal system. All of your personal assets are at risk.
3. Complying with employment laws
Sooner or later your business will require the help of employees. With that said, employees can be the greatest asset or the greatest risk. Every business needs an employment manual and clear roles for each employee to work within.
5. Failure to understand business tax laws
Is your business subject to sales tax laws? Are you required to pay quarterly? This should be figured out quickly once the business starts.
6. Inappropriate/incomplete contracts with outside vendors
When you deal with third parties you need to ensure that the contracts that define each companies rights and duties are clear and defined. If you are negotiating a lease you need to fully understand the lease you are executing.
8. Failure to get nondisclosure agreements
Depending on the type of business, you may consider obtaining non-disclosure agreements. This could protect confidential or unique information from your competitors.
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