How to Avoid Common Legal Mistakes When Running a Small Business

Legal Mistakes
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By Small Business Pulse

There are rules, regulations and laws surrounding just about every area of running a business. When owners don't understand the limitations of these regulations and laws, they run the risk of losing everything. Resources are in place to assist business owners, because not knowing and internalizing these principles can ruin a business venture.

Always structure a business properly
One thing that some people don't understand when starting a business is that they are personally liable for anything that goes wrong. Entrepreneurs who do not structure their business correctly can lose everything if someone brings successful legal action against them, so from the start, it’s critical to structure your business correctly. For someone who has a sole proprietorship, it sometimes seems like an unnecessary hassle to incorporate, but this is the only way to protect personal belongings if something goes wrong with the business itself. This can be an S-corp, an LLC, or a partnership, but something needs to be set up at the start to protect your property and also maximize possible benefits.

Avoid stealing intellectual property
You may have the perfect name chosen for your business, however, research it first to ensure that someone else has not already claimed it. The last thing a new business owner needs is to invest a large amount of money into promotional materials only to have to redo everything after finding out another company already exists under the same name. Likewise, it is also necessary to make sure that your logo is free and clear to use. If so, legally claim the original name and logo as soon as it is possible.

Have an exit strategy lined up
Understand your role in any new company. Furthermore, if there are multiple people involved, make sure that everyone has his or her own defined role as well. Nothing can destroy a business partnership like someone feeling they are being taken advantage of or having their toes stepped on. Make sure everything is in writing and all obligations are spelled out. Ensure original contracts specify how an individual can opt out and leave. Nothing lasts forever, and there needs to be a way for you and your business partners to walk away. Make sure that the way out is clear with a detailed outline of what actions need to be taken. An attorney may be necessary to make sure that all agreements between business partners are legally binding.

Don't do it yourself
The best way to run a business smoothly and avoid issues that can sneak up and hurt you down the line is by hiring an attorney. There are many websites that promise to walk you through any necessary steps and let you save a few dollars by bypassing attorneys. However, by doing everything by yourself, there is a risk of leaving out something important or setting yourself up for a lawsuit somewhere in the future. Attorneys know the law and everything that needs to be done to ensure that your business is successful, legally run, and on the up-and-up. By making sure an attorney is involved, entrepreneurs can avoid most of the legal mistakes that destroy many smaller businesses.