7 Legal Mistakes Made by a Small Business

Small Business

7 Legal Mistakes Made by a Small Business


As a small business owner, you undoubtedly launched your enterprise with the idea of “doing everything right” when it came to addressing necessary legal matters. If you are like many small business owners, you may find yourself overwhelmed at times and perhaps not staying on top of certain legal issues. If that is the case, you are not alone. There are seven legal missteps rather frequently made by small businesses in the United States and other parts of the world.

Small Business 

Lack of Proper Business Structure

 A surprising number of small businesses fail to establish the most appropriate legal structure to meet the needs of their venture. Indeed, there are even small businesses that fail to take any affirmative step to establish a legal business structure and end up being sole proprietorships by default rather than design.


If you have a question about the legal organization of your small business, or if you think a change in the structure is necessary, you should seriously consider seeking legal assistance. A qualified, experienced business attorney is in the best position to provide a competent analysis of your business’ operations, needs, goals, and objectives to ascertain what legal structure makes the most sense for your enterprise.


No Human Resources Policies

 If your small business has but one employee, you need human resources policies. These policies need to be in writing.

 Time and again, a growing small business fails to develop written human resources policies in a timely manner. “In a timely manner” legally means that these policies should be formulated and in writing before a small business makes its first hire.


Trash Talking

 With the rise of social media, trash talking has become the order of the day with regularity online. Businesses of all types have joined the fray in some instances. Indeed, trash talking by businesses about their competition has become increasingly commonplace.


The reality is that trash talking can expose a business to legal liability for slander, libel, defamation, and false light. In other words, if you were to join in the trash talking scrum, and if you misstep and make a factually incorrect and damaging statement about a competitor, you may end up sued. If you were to lose such litigation, the cost to you and your business may prove significant. Thus, no matter how tempting — and even if you feel you’ve been wronged — don’t trash talk about the competition.


Lawsuit Happy


More than a few businesses in this day and age are highly litigious. These enterprises file lawsuits at the drop of the proverbial hat.


When a small business proves to be particularly litigious, such an enterprise typically is suing on a pro se basis. What this means is that a business is suing without the professional assistance of legal counsel.


A skilled, experienced, reputable attorney typically will encourage a client to at least attempt negotiating a resolution of a dispute before heading off to the courthouse. The reality is that many disputes can effectively be resolved through thoughtful negotiation as opposed to aggressive litigation.


No Intellectual Property Protection

 Another prevalent mistake made by small businesses of different types is the failure to protect appropriately intellectual property. This includes a failure to obtain appropriate patents, trademarks, and copyrights as needed. This failure can have profound consequences. In the absence of appropriate intellectual property protection, a competitor can swoop in and lawfully “take” intellectual property from a small business.


If you believe that you’re intellectual property that needs to be protected, including the trademark of your enterprise, you definitely should seek legal assistance. Patent, trademark, and copyright law is a challenging segment of the legal profession. Indeed, attorneys are specially certified to work in these areas of the law.


Lack of Appropriate Customer Data Protection

 Rarely does a month go by without an explosive media report about customer data being hacked or stolen from a business. Large businesses who lose customer data in this manner are making headlines, but small businesses fall prey to theft of customer data as well.


As a small business owner, you’ve a legal duty to appropriately protect the data you maintain about your customers. You open yourself up to legal liability if your computers are hacked and customer data is pilfered. You will need to be able to demonstrate you exercised reasonable care in protecting customer data in order to avoid what can be a significant judgment against your company for negligence.


Securing your company’s client or customer database definitely is an area in which you need to seek professional assistance. There are cybersecurity experts that focus their efforts on protecting small businesses against this type of breach.


Failure to Timely Remit Payroll and Sales Tax

 Another surprisingly rather commonplace mistake made by some small businesses is the failure to remit payroll and sales tax in a timely manner, if at all. The failure to pay these types of taxes when due can have catastrophic consequences for a small business. The cold, hard reality is that the failure to appropriately remit payroll or sales tax can result in business being shut down. When that happens, a taxing authority will then attempt to seize the assets of a business and sell them to satisfy an existing tax liability.


The bottom line about all of these potential legal missteps is that they can be avoided. Moreover, each of these issues can be addressed in a proactive manner by engaging the services of appropriate professionals, including a small business lawyer.


 Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, where you can get personal checks and business checks.

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