Most entrepreneurs don’t have a team of lawyers following them around to help make every decision. Just as entrepreneurs need to know the basics of accounting and marketing, they also need to understand the basics of business law to avoid the potential failure that follows costly litigation.
As a lawyer and an entrepreneur, I have experienced the struggles of business on both sides. But most entrepreneurs don’t have the legal experience that I do, so they end up feeling lost and uninformed when making big decisions with possible legal ramifications.
You don’t need to go to law school to be a successful entrepreneur -- you just have to learn the essentials so you don’t get caught off guard. Here are three areas of law every entrepreneur should be aware of:
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1. Vicarious liability
2. Overtime rules
Working long hours for little pay is a part of life at a startup. Most people know that putting in more than 40 hours per week equates to working overtime, but it’s important to remember that certain salaried employees are entitled to overtime pay.
Some employers attempt to dodge overtime entirely by classifying employees as independent contractors. Not only is this illegal, but it’s also easy prey for wage and hour plaintiffs’ attorneys. A few startups are already facing legal woes over this practice, so make sure you classify your employees properly.
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If you have non-exempt employees working overtime, including off-the-clock work, pay them for that time and make sure your payroll administrators are up-to-date on current wage and hour laws. Although it might feel expensive now, doing so will save avoidable litigation costs down the line.
3. Patents, copyrights and trademarks
You don’t have to go back to school for your J.D., but as an entrepreneur, you do need to be prepared for common legal situations. Extended, expensive litigation can drag down even the most promising startup. Educate yourself on relevant laws so it doesn’t happen to yours.
(The above article is not a substitute for legal advice.)
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