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Small Business Legal Mistakes to Avoid

By: Vlad Ehrsam

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.

Contracts or service agreements are a must for any small business. It is difficult to uphold a verbal agreement in court and therefore a well written service agreement can protect you and your business. The service agreement should clearly define all policies and agreements. It should provide protection for your company and its interests.

Your service agreement should definitively state exactly what you’re agreeing to do and the specifics of that. It should detail the definition and scope of your service. You should also define what is not included in your service and if any extra charges may be applicable. Don’t leave anything out.

Employment Termination– To keep overhead costs down, a major percentage of small businesses begins with a low number of employees. Staff members come and go, as business growth changes. It makes no sense to keep staff on the payroll if the business can’t support the wages.

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.

If you need some additional help many small businesses choose to hire independent contractors. Hiring independent contractors can seem like a simple choice since you’re not responsible for reporting their earnings to the IRS.

Even though you may have hired an independent contractor the IRS may consider their job to be that of an employee’s. This means things could get complicated for you. Be sure to check what the IRS considers employee’s jobs before hiring an independent contractor.

Sole Proprietorship verses L.L.C. – Under many state laws, founding partners are jointly liable for the debts and obligations in general partnerships. Operating a business as the sole proprietorship puts the owner in a vulnerable position.

A better choice would be to start your company as a limited liability corporation. This means your company is a separate entity that must deal with its own legal issues and you are not personally held liable.

Intellectual Property Issues – Even low-tech companies have intellectual proper issues that directly affect the long-term success of the business. Pay close attention to confidentiality and invention assignment agreements, registered trademarks, and copyright notices. Protect the company’s trade secrets adequately.

Record Keeping – Improper record keeping can cause serious problems. Accurate accounting records are essential if the IRS is the least bit suspicious about the company’s financial records. Invest in a bookkeeper or an accounting program to make it easier to keep account of your daily transactions. Also, organize files to be readily accessible in case of an IRS audit.

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.simplepetcare.com/pet-articles

Vlad Ehrsam runs a very interesting website at Full Info on Business, it's one of the webs most up to date Business sites, while you're there sign up for the free newsletter.
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