5 Most Common Legal Mistakes by Small Business Owners
This article is for educational and entertainment purposes only. This is not legal advice and should not be relied on as such. Every case is different.
Owning a business can be an exciting and rewarding experience. Nevertheless, entrepreneurs overlook the legal obligation of owning a business, leaving them vulnerable and defenseless. Below are some of the most common legal mistakes small business owners can avoid:
1. Not Having Any Legal Support
Owning a business comes with many unexpected expenses; hiring the proper legal support should not be one of them. Small business owners often will find themselves dealing with legal matters such as disclaimers, contracts, agreements, licenses, registrations, and trademarks. Having the proper legal support will know how to handle these issues probably, but they can help avoid serious legal matters in the future.
2. Lack of Documentation
Having all documents in writing is crucial. Founders, employees and shareholders often work together, and it is essential to put a written agreement that outlines each party’s roles and obligations.
3.Not Choosing the Right Business Entity
Once you have decided to form a business, you will need to determine what type of entity you should own and operate. You will typically choose between three types of entities – an LLC vs. a corporation vs. a partnership. There are assets and liabilities to each one, which will have both legal and tax implications.
4. Not Following Business Tax Laws
Business tax law can be a complicated process if you do not have the right tools legal support to guide you and your business. Many types of tax small business owners might have to file, such as income taxes, employee taxes, excise taxes, property taxes, sales, and use taxes, self-employment taxes, and energy taxes, and that is only the beginning. Business owners must understand the federal, state, and local tax requirements to make timely payments. While taxes might seem overwhelming to some, they are an essential part of running a business.
5. Failing to Protect Intellectual Property.
Copyright, patent, and trademark are the three ways to protect a business’s intellectual property.
A patent is a limited duration property right relating to an invention, granted by the United States Patent and Trademark Office in exchange for public disclosure of the story. Please visit www.uspto.gov for more information.
A trademark identifies and distinguishes the source of one party’s goods from those of others.
A service mark identifies and distinguishes a service’s source rather than goods. Some examples include brand names, slogans, and logos.
A copyright protects original works of authorship.
To obtain a copyright, you or your business must show three things, including that:
you authored a creative work
the work is original, and
the result is fixed in a tangible medium of expression.
When picking a company name, it is vital to research to avoid trademark infringement or domain name problems and ensure that the name chosen is available to use. To prevent intellectual property violations, one must do its due diligence around the use of third-party content.
These are just some of the most common mistakes made by small business owners. Often these mistakes can snowball into larger problems down the road. We encourage our clients to be proactive in protecting their business and seek legal guidance before it becomes too late.