What is Legal Consideration – If you own a business, you’re used to managing risk. Everything from marketing to supply chain management requires decisions and calculations. Some risks are easier to resolve, such as whether or not to create a company social media profile or if you can afford to hire a new employee.
However, there are also many legal risks that business owners must thoughtfully and carefully address. From regulations to liability, here are some of the top legal considerations that entrepreneurs should have on their radar.
Guarding Against Liability
One of the most important things you can do as a business owner is to make sure you have a good lawyer. This may sound like a line from a movie, but having a good lawyer in your corner of the ring can be a lifesaver. In fact, having legal counsel available can help you avoid unnecessary risks or penalties in the first place. A lawyer can provide invaluable advice on legal business activities like:
- Complying with federal, state, and local laws.
- Staying abreast of the most recent tax regulations.
- Consideration in contract law – Creating business contracts and agreements with clients and customers.
- Choosing a legally sound business entity and name.
- Mitigating liabilities and risks throughout your operation.
Having a lawyer whom you can trust is one of the building blocks to long term business success. So make sure to go about the lawyer recruitment process thoroughly. Start by looking for referrals and doing your research on local legal services. Then create a shortlist of candidates you’d like to consider.
In addition to having a lawyer, it’s important to guard against liability throughout your business. There are obvious things like insurance to protect against slip and fall accidents in a brick-and-mortar business. In the digital world, though, the considerations can go much further.
For instance, the social media world is fraught with potential liability. Everything from following the Federal Trade Commission’s guidelines on paid ads to guarding your brand’s reputation or sharing other’s content should be carefully considered.
Choosing Your Business Structure
Along with a lawyer, it’s important to consider getting an accountant that you can lean on. This can help you at tax time, in particular.
Along with tax-related best practices, it’s important for a startup owner to choose what kind of business structure they’ll use. This can include:
- A sole proprietorship: This is the easiest business entity and it involves simply operating by yourself as a single owner.
- A general partnership: This is a simple company structure shared amongst multiple owners that are invested and have divided the responsibilities of the company.
- A C-corporation: This is a typical incorporated business that is owned by shareholders.
- An S-corporation: This is similar to a C-corp, although it has some restrictions and profits and taxes are handled a bit differently.
- An LLC: This is a streamlined business entity that incorporates elements of a partnership and a corporation.
- A nonprofit: This is a business organization that qualifies for the IRS 501(c)(3) status and is thus tax-exempt.
Choosing your business’s operating structure is a huge legal step that should be taken very seriously.
Knowing Local and Federal Business Regulations
It’s important for entrepreneurs to consider regulations at federal, state, and local levels as they launch and grow their companies. These regulations can be diverse and can impact every aspect of a business.
For instance, if your company is successful, you may reach the point where you have fifty employees. If that is the case, you will be required to provide FMLA (Family Medical Leave Act) benefits for your staff
Even tiny businesses must be careful when it comes to regulations. For instance, many independent contractors in the state of California were devastated overnight by the Golden State’s AB5 bill. The bill insisted that companies hire freelancers as employees.
This legal pressure led many companies to simply part ways with their contracting staffers. The point is, it’s always important to stay up to date on the regulations that can impact your company.
Handling a Court Proceeding
While it’s good to protect yourself against any possible lawsuits, it’s impossible to be one hundred percent protected at all times. If you find that your business is being taken to court, it’s good to be prepared.
Always start by getting legal counsel. Hopefully, if you’ve played your risk management cards right, you already have a lawyer that you trust waiting in the wings. If not, the first thing you should do is get a lawyer.
You should also always try your best to remain calm during a legal business dispute. They are not uncommon, and any irrational or emotional reactions can often exacerbate an unfolding situation.
Once you have your lawyer and you’re calm and collected, take the time to gather evidence to support your case. Even if you’re convinced that you’re in the right, it’s important to set reasonable goals for what you want to accomplish in court.
If you’ve never been involved in a court case before, it’s also helpful to read up on what your experience will be. You can even prepare for something as simple as an arraignment hearing. If you take the time to research and prepare, you’ll be able to handle yourself with greater poise when you’re actually in court.
Once you have reached a settlement, it’s also crucial you get everything in writing. Keep detailed records of anything pertaining to your case in order to help you comply and to protect you in the future.
Legal Safety for Future Success
It’s easy to get wrapped up in the nitty-gritty of launching a startup. Whether you’re opening a restaurant, setting up an e-commerce store, or selling goods at the local farmer’s market, the details can be overwhelming.
However, it’s essential you don’t overlook the legal considerations that can impact your fledgling business. Take the time to address things like business structure, legal counsel, and business regulations upfront. If you can head off these considerations before they become concerns, you’ll be better equipped to succeed in the future.
