5 Legal Mistakes Small-Business Owners Should Watch Out For

Even though you’re a small-business owner, rather than an attorney, you still need to make sure you’re not violating any potential legal issues. Litigation fees can be astronomical, not to mention the drain of time and resources on company personnel.

Take note of these five legal mistakes every small-business owner should watch out for:

1) Not formalizing your business structure. If your shop is small, you may think it’s inconvenient and a bother to go through all the steps of incorporation. However, formalizing your small business structure can offer substantial legal protection. If you haven’t taken steps to protect them, all your personal assets could be in jeopardy in the event of a lawsuit.

2) Improperly classifying workers. Failure to proper classify a worker as an employee can result in penalties, fines, and back taxes. Refer to the IRS guidelines to ensure your workers are properly classified as an independent contractor or employee.

3) Infringing on trademarks.
If you’ve been suspect of an intellectual property right violation relating to another company’s business name or trademark, you could open yourself up to a lawsuit or even a “cease and desist” order. In order to avoid any trademark infringement, do your due diligence and check with the U.S. Patent and Trademark Office to ensure the name and trademarks you’ve chosen are yours and yours alone.

4) Making handshake deals. While a “handshake deal” may be fine for the golf course, make sure you follow up with a formalized written contract. In today’s litigious age, a written, formal contract offers protection to you, your business, and the other party. It’s a good idea to work with a an experienced corporate or contract law attorney on complicated contracts.

5) Ignoring the law. This catch-all legal mistake every small-business owner should watch out for means heeding the various laws that surround the operation of your business in your industry. This includes following laws relating to government regulation of your industry, security laws relating to your business capital, employer-employee laws, and protection of your copyrights, trade secrets, patents, and inventions.

Taking care of business legalities may not be as exciting as running your small business, but it’s critical to avoid a disastrous legal mistake that could mean the future demise of your business.