The U.S. Bureau of Labor Statistics (as reported in Lending Tree) estimates that about 20 percent of small businesses don’t make it through the first year — and some 50 percent are likely to fail after about five years.
While the failure rate is attributed to a range of factors, it’s important to note that a liability issue could put your business under if it is new and you’re struggling to break even.
Hiring a small business lawyer when you first start your business can help to prevent all kinds of problems, from tax issues to employment-related liability. Here are some of the most common issues that we come across when working with small businesses.
1. Founder Agreements
You may think that it’s enough to move forward based on a verbal agreement, a loose contract, or even a handshake. But without a clear and legally binding contract signed by both parties, you can run into snags which can turn into costly disasters if not handled promptly.
Founder agreements are key when you are first starting out and they will detail ownership, salaries, dissolution, removal procedures, governance, profit sharing, etc.
Hiring a small business lawyer at the outset will reassure you that your investors, co-founders, and co-owners are protected and that you are also protected should there be an issue with ownership or investments.
Having clear and binding agreements at the outset is usually simple and is a win-win for both parties.
Learn more about our business law services.
2. Labor Law
Any small business owner should be fully educated on labor law in order to ensure that their employees are treated fairly and to cover themselves in the event that an employee parts ways based on something they see as a legal issue.
Employees need clear agreements in place as you onboard them, for the duration of their employment, and terms outlining what happens if you part ways with them.
A small business lawyer can with legal details pertaining to:
- Hiring and employment policies
- Job postings
- Job classification standards
- Fair hiring
- Independent contractor agreements
You may believe that you are a fair and equitable employer, but there is always the risk of having a disgruntled employee digging up some problems later on.
Don’t risk your business’ reputation by being sued for something this simple to set up at the front end!
3. Non-Disclosure Agreements (NDAs)
When you work side-by-side with an experienced law professional, you can be sure to avoid even small missteps in the hiring, employment and dismissal processes. Documents such as non-disclosure agreements may also be drawn up for employees where applicable.
Drawing up a detailed NDA can help to protect your intellectual property value in the long term. If you are in technology or another specialized field, you don’t want to skip this step.
4. Intellectual Property Liabilities
If you don’t formally protect confidential information, you could be in trouble at any point in time — and in fact, it could cost you your business.
It’s also important that you have a small business lawyer go through copyright and libel issues if your organization is a media company or even if you produce a lot of digital content.
All individuals directly involved in the organization should enter into agreements pertaining to the actual work, as well as the intellectual property end of things. This may include trademarks, patents, copyright, and related issues.
5. Registration, Licensing, and Reporting
If you have a small business, you need to ensure that it is registered with the state and that you are in compliance with local tax laws.
Having a great accountant is essential for this, but a business lawyer can also help you to understand exactly where and what you need to register.
Here are some examples of licenses and registration:
- Sales tax licenses
- Vendor licenses
- Restaurant or food vendor licenses
- Liquor licenses
- Event licenses
- State commission registration and reporting legislation
The bigger and more complex your business, the more likely you are to miss something, and if this happens you’ll pay for it later.
6. Terms and Conditions for Clients / Customers
Just like you want to have contracts in place with investors and colleagues, you will also want to ensure that you have clear policies outlining terms and conditions for the people that you are selling your services to.
This could include items such as:
- Return policies
- Distribution terms
- Terms and conditions agreements
- Delivery terms
- Customer service
- Vendor permitting
- HIPAA compliance
- Laws relating to digital marketing (such as privacy regulations)
All parties who are financially connected to your business need to be covered by contracts. That’s why it’s essential to have a small business lawyer work through each aspect of contract law with you.
7. Neglecting to Consult a Qualified Business Lawyer
Knowing which administrative steps to take when you’re just starting out as a small business owner can be confusing, to say the least!
Don’t wait any longer to get help from a trusted Colorado business lawyer.
Call 303-780-7333 for a free 30-minute consultation, or click here to schedule an appointment.
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