Small Business Legal Mistakes to Avoid

Small business owners make legal mistakes all of the time, which often results in the downfall of a company. Without the proper knowledge, business owners find themselves repeating the same mistakes. The SBA (Small Business Association) stresses the importance of ending the circle of disastrous legal errors by investing in Continuing Education business courses, or by hiring a business consultant.

In today’s world of technology, several resources offer up-to-date material on business procedures that directly affect the legitimacy of a company. The following are a list of common mistakes and ‘how-to’ avoid repeating them.

Service Agreements – Conducting business involves drafting up a Statement of Work or a Written Agreement. Without a contract, it is difficult to enforce the law. Carefully draw up the business terms, draft it in the company’s favor, and provide flexibility and protection.

Start by listing the ‘scope’ of the service. For instance, cleaning a home would take 2-hours. In those 2-hours, list ‘what’ service and ‘how’ long it will take. Include anything that may be a special request. Excluding a portion of the service could be a costly mistake. Drafting a contract takes time, but it is necessary.

As a small business you may or may not have several employees working for you. The termination of an employee is a touchy subject but may be necessary at some point in time. You should be clear on employee termination laws and regulations.

Sometimes employees will threaten with “Unlawful Discharge” suits. It is important that each member knows they are an “at will employee,” which means they can be terminated at any time, or for any legitimate reason.

Since labor taxes can be so high many small business owners choose to hire independent contractors. Independent contractors are required by the IRS to claim and file themselves. You may think this makes things much easier on you.

Use extreme caution assigning tasks to the company’s IC’s. Some projects can change the status of an IC to an Employee in the IRS’s eyes. If you’re uncertain as to what jobs classify as IC or Non IC status, visit your local state website or www.sba.gov for more information.

If you own a small business with someone else you need to know about the legal definitions of your partnership. If you’re a sole proprietor this means you own the business yourself and can be held legally responsible for anything to do with your business.

A better choice would be to start a business as a limited liability corporation. This means that if your business is sued, any personal finances and funds can be excluded from the ruling.

No matter what sector your company is in you need to be concerned with intellectual property issues. It is important that you know and understand the term and issues surrounding copyrights, registered trademarks, confidentiality agreements, and invention assignment agreements.

If you don’t want problems with the IRS, good record keeping and accounting is essential. You can cause serious problems for yourself and your company if you don’t keep records of all business transactions.

Experienced Corporate Attorney – No matter what entity a business operates under, a growing business will face issues that require the service of an experienced attorney. Unfortunately, cost is a huge issue for most small business owners. Corporate attorneys do charge a much larger sum for their services.

At some point you may need to consult with an experienced corporate attorney. While most attorneys do charge a high fee, there are many situations where it may be necessary to do so. Sometimes there’s no substitute for professional advice.

Be sure to find an attorney that you’re comfortable with since you may need his or her services in the years to come. It may be wise to meet with several attorneys before you choose one.

If it anytime you feel in over your head, consult with an attorney. Business owners can get themselves into very serious trouble without the proper legal knowledge.

Article Source: http://www.article-voip.com

About the author: Vlad Ehrsam is the chief writer at Full Info on Business, visit there today for the latest Business advice, and while you're there sign up for the free newsletter.

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