As an entrepreneur, you have a particularly big role to play in the success of your business. You are the sales person, the developer and the customer representative -- all at the same time. While outsourcing some of these roles or hiring others to fill these positions is a good idea, scarce resources may not give room for such.
No matter what roles you end up serving, it's important to remember that being a small business owner does not give you immunity from the law. Your small business is very much regulated by the same laws guarding big businesses, so you have to know how to handle legal issues. While not all of your legal needs would require hiring a lawyer, all of it does require your knowledge about the law. A little bit of preparation will go a long way to help.
Here are five ways to protect your fledgling business from facing expensive legal situations as it grows.
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1. Read-up on all available business laws.
They say knowledge is power. Nothing is as important as keeping yourself armed with adequate information on business laws. Every recognized type of business has laws regulating their operations. A good place to start is the SBA website.
Some of the legal aspects of business you must be familiar with include the following:
- Financial laws: Read up on the laws that concern businesses, investors and your customers.
- Employment and labor law: Get familiar with employment and labor laws. This will help you understand the legal aspects of hiring practices in business.
- Intellectual property: The law gives authors of creative materials protection over their works. Understanding how intellectual property law works will help you know how to protect your work.
- Marketing and advertising law: Businesses get sued over misleading statements made in their marketing materials. Understanding marketing and advertising laws will help you avoid getting in trouble with the law.
2. Back your partnerships up with a written agreement.
Always get it in writing. Before you kick off any relationship with a new business partner, client or service provider, put the terms of your relationship with them in writing. This will save both of you from ending your business relationship in court.
3. Stay up-to-date on your paperwork.
Getting charged with fraud is expensive. In several scenarios, businesses have been hit with fraud cases just for being careless with their paperwork. When it comes to handling your taxes and its documents -- if things are beginning to look confusing -- be willing to spend a few hundred bucks to have a professional sort it out. Having a lawyer defend your business against fraud can be pretty expensive. But facing charges of fraud could dwarf attorney fees. In some states, individuals or businesses could be fined as much as $5,000 to $250,000, according to research from criminal defense law site, Monder Law.
Tax filing and record keeping is usually the most tricky part for entrepreneurs. Young founders often find the process very mundane -- given that they've been conditioned to handle more complex, mental challenging tasks. This, however, is their shortcoming as things can eventually get muddled up and go awry. If you find that handling your paperwork gets on your nerves, hiring a professional to help you take care of it -- while you pay close attention to learn how it's done -- can save you a lot of headache in the future.
4. Seek legal advice when you need it.
Don't wing it. If you're not clear on the terms of a new contract you're about to enter into, have a lawyer read and interpret the document to you. While you might be very eager to append your signature to the agreement, taking a little caution will keep you from entering a long and painful business relationship.
In a Geekwire article, Josh King, an experienced lawyer for tech startups, recommends hiring lawyers that specialize in the area of your business. Using an industry-specialized lawyer will help you get a legal counsel who has a better understanding of your needs while keeping the cost down. While focusing on the lawyer's field of specialization, you should also make sure they are licensed to operate in your state. You can also use this directory from American Bar Association as a guide.
5. Prioritize your IP trademarks.
Intellectual property(IP) is the bread and butter of most online businesses. That said, this is where attorneys make the most money when it comes to small businesses. There's sometimes a very thin line between creativity and theft. Intellectual property owners need to put in efforts to ensure their rights are protected. As a small business, securing a trademark for your IP is the only way to guarantee no one will steal your idea from you.
NOTE: The author is not a legal practitioner and is not licensed to give legal counsel to anybody.