Legal headaches are the bane of any small business owner. It’s not enough that you have to run a tiny company with limited resources — now you have to deal with lawyers and mountains of paperwork as well! What’s more, a liability lawsuit can cripple your entire business and stretch its resources to the max. Now, seeing how such a scenario could potentially spell the end of your business, it’s always wise to come prepared. Therefore, take a look at these five most common legal issues businesses face and avoid disaster before it strikes.
1. Employee Agreements
One of the top causes of legal headaches that business owners face nowadays — disgruntled employees. For instance, a lot of startups are founded with very loose agreements between the founder, the co-founders, and the employees. As a result, there is a lot of in-fighting regarding who owns what, and what’s everyone’s share in the company. Facebook is just one example of this. Three Harvard college students sued Mark Zuckerberg for stealing their idea. In addition, “wrongful termination” is yet another source of legal migraines for many an employer.
To avoid this, set a clear hierarchy from the very start and make everyone sign carefully drafted legal documents so that there is no room for legal hair-splitting of any kind later on.
2. Discrimination and Harassment
Discrimination and harassment lawsuits attract a lot of unwanted media attention for your company which can ruin your brand’s good image; not to mention all the legal ramifications that can leave a huge hole in your wallet as well.
In today’s workplace, these two are pretty common. As a result, you’ll need an exceptional HR team to deal with these kinds of issues and cut the problem at its root before it goes public; it’s better to solve any claims that may arise within the company instead of going to court.
Schedule frequent meetings with your HR department and ensure that all is well and that there are no outstanding clashes between co-workers due to ethnic, religious, or social differences of any kind.
3. Personal Injury Claims
If you have multiple people working for you, chances are someone will get hurt; eventually. In that case, the only thing guarding you against a potential lawsuit is your Worker’s Compensation Insurance. However, things can get really messy if your injured employee doesn’t want to settle out of court. If it comes to that, you need to do everything that’s within your power to dissuade them from filing a complaint. Look for some legal advice and consult with an exceptional compensation lawyer to avoid the cost of a lengthy lawsuit. In addition, this will also help you gain a better understanding of your employees’ legal rights — and your own legal obligations — preparing you for any future complaints that might come your way.
4. Protecting Your Name
There’s a lot of patent litigation going on at the moment, especially with high-tech startups. Before developing a product, be sure to conduct meticulous research of patents and copyrights connected to your “invention.” Otherwise, you will have a huge legal battle on your hands. Another thing worth checking is your own claim on certain copyrights; especially that of your domain name. There’s nothing worse than investing all your money and love into your brand only to find that it’s not properly protected. In addition, be careful of “trademark bullying” that some larger companies might exert on you. One such case is McDonald’s claim on “Big Mac” which they lost rights to (inside the EU) earlier this year during a dispute with the Irish Supermac’s.
5. Having the Right Corporate Form
Your brand’s (and your own) liability will vary greatly depending on the type of legal structure you choose for your business. What’s more, you’ll have to pay different taxes based on this structure as well. Naturally, this is where a lot of the confusion comes from which can result in a lot of tax-paying issues. For instance, when you are a corporation, you pay taxes twice; first, the profits are taxed, and then the dividends that are distributed to the shareholders.
Other business structures have their own pros and cons. Make sure you get a firm grasp of how each of them works to avoid any unwanted legal repercussions coming your way.
Now that you know the most common mistakes your fellow entrepreneurs make, you can work on avoiding the same. Be careful and try not to get on anyone’s bad side.