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Being aware of legal considerations for your business is paramount, especially when you’re not a lawyer. It’s why we know that it’s important to say that we’re not lawyers and this is not legal advice.
To Be, or Not to Be — Incorporated, that is
Imagine your business as a ship setting sail on the vast sea of commerce. Incorporation is like choosing the right ship for your journey. When you incorporate, you’re essentially creating a separate legal entity that can shield your personal assets from business liabilities. It’s important for taxes and can be a huge plus if things don’t go as planned.
Incorporating can make it easier to raise capital and provides a certain degree of credibility with customers and partners. But there’s a catch. It means you have to do extra work and pay extra costs for things like annual reports and other required filings.
But incorporation isn’t the only option, it’s just the most common one. Depending on your situation, it might actually make more sense to operate as a sole proprietorship or a partnership. It’s worth discussing with a legal expert to figure out the best fit for your specific situation. After all, you wouldn’t set sail without a map, right?
Intellectual Property: Guarding Your Creations
Since we talked about this one before, we won’t rehash the whole topic other than to say that Trademark Engine is who we trust for our trademark and copyright issues (we used them to trademark our logo and our name).
The one thing we didn’t really dive into are trade secrets. If you produce a unique product or service or simply have a unique way of making something that is considered commonplace, you might have what’s called a trade secret. The non-lawyer explanation of this concept is that a trade secret is confidential business information that gives you your competitive advantage. But it can also include customer lists, manufacturing processes, or proprietary formulas (like Chick-fil-A’s secret recipe). They may not be registered like patents or trademarks, but keeping them secure is just as important — and most states provide legal protection for them (including for those who do business with the government and don’t want them becoming public records).
Human Resources: Building a Happy Team and staying Compliant
We all know that HR is one of the biggest litigation risks a business owner faces. Everything from discrimination and harassment, to conflicts around pay and benefits. Going back to our nautical metaphor, human resources are the crew that that keeps your ship sailing smoothly. Having strong human resources (HR) practices not only helps you manage your team effectively but also keeps you compliant with employment laws.
This is a topic unto itself, so we’ll dive deeper into it next week, but the short version is that you need to have clear employment processes, consistent employment practices, and be transparent about pay ranges and benefits in your job postings.
The other aspect we’ll dive into next week is to make sure you’re compliant with labor laws — everything from wages to workplace safety. Familiarize yourself with federal and state laws regarding minimum wage, overtime pay, and workplace safety to avoid costly fines and legal issues.
If you use employment contracts, then having clearly written contracts can prevent disputes and clarify expectations — this is one area where it’s worth working with an employment lawyer to draft a good contract to use.
Compliance: Staying on the Right Side of the Law
We wrote about compliance training, and it’s because compliance like following the rules of the road when you drive; they ensure you’re not speeding, running red lights, or crashing into other vehicles. (We couldn’t find a way to work the nautical theme into that one.) Staying compliant means following all relevant laws and regulations to avoid legal trouble.
Don’t forget licensing and permits if your business requires it. If you’re a restaurant, for example, you’ll need to register with your state’s regulatory agency and jump through a few more hoops before you start serving. If you want to serve alcohol, there’s usually a separate permit and other registrations to finalize before you start pouring the bubbly. Most of the time, though, this is simply a general business license or tax certificate (which is why it’s important to know where your business falls).
Speaking of tax obligations, don’t forget to pay them! We’ll talk more about that later, but the short version is: pay your taxes.
Lawsuits: Handling Legal Battles
Other than your growth and success, we hope you never have to deal with getting sued (or needing to sue someone). The sad reality is, even with the best precautions, disputes will happen and some of them will end up in court. It stinks to think about, but handling legal battles effectively is crucial to protect your business — this includes getting an attorney involved versus trying to go it alone. (In fact, our founder is fond of the quote “he who represents himself has a fool for a client.”)
Since engaging a lawyer is so important, we’ll just hit the highlights here. If you’re on the receiving end of a process server, you have to respond and do so promptly and correctly. Ignoring legal notices or failing to respond can lead to default judgments and worsen your situation (hence why a lawyer is important).
On the flip side, if you need to file a lawsuit to protect your business interests, then having good documentation is crucial — that means keeping detailed records of any issues or disputes before you need them.
Wrapping It Up
Navigating the legal aspects of running a small business might not be as exhilarating as the day to day of bringing your dream to life, but it’s just as important.
Remember, you don’t have to tackle these legal considerations alone — consulting with a legal professional can provide valuable guidance tailored to your specific needs. And as you sail through the exciting waters of entrepreneurship, keeping an eye on the legal landscape will help you steer clear of potential storms. (Yeah, we’re out of nautical tie-ins.)
Not sure where to start? Need help finding a legal expert? We can help.
