Entrepreneurs are known as busy and passionate people who don’t have a lot of time to waste. However, being successful in your field of work and being competitive on the market is easier said than done. This claim can be supported by the official statistic, which says that almost a third of newly-created businesses don’t survive the first five years.
So, in order to build a successful enterprise, an owner needs to be competent in many different areas. One of these areas is the legal area. Therefore, we’ve decided to provide you with 5 legal things every new entrepreneur needs to know. Without further ado, let us begin.
1. Legal Consultation is a Must
Naturally, small company owners have a pivotal role in their businesses, due to all the day-to-day activities they need to perform. They have their hands in every element of the company, like customer service, product design, thinking about company plans, creating marketing strategies, etc. So it doesn’t come as a surprise that a higher percentage of them think they need to wear a plethora of different hats in order to make their businesses successful and competitive. But, overwhelming yourself with too many obligations in different areas of work is not a good option.
Of course, nobody in the world has this many capabilities. So, it is perfectly normal to see that many mistakes can be made along the way. However, making a legal mistake can have severe consequences for the business as of the whole. It would be best for every owner, who doesn’t have experience in this field, to take this hat off and seek legal consultation. This is the easiest way for an owner to avoid all the mistakes that can emerge now and then. For some people, the price is something that can prevent them from seeking legal counsel. However, this investment will ensure that you can avoid bigger losses in the future.
2. Choose the Right Business Structure
One of the most important legal things to consider when launching a new enterprise is choosing the right business structure. Your decision needs to be based on the circumstances that surround your company. Some of the basic options are LLC, corporation, sole proprietorship, limited partnership, and cooperative. Naturally, there are a lot of sub-options you need to take a look at. But this requires a lot of research before you are able to make the best decision for your company.
At the same time, before you make the decision, you need to make sure you are introduced to the legal system of your state and see what the best solution for you. At the same time, before you make the decision, you need to make sure you are introduced to the legal system of your state. For example, if you are interested in starting a business in Nevada, you need to know that this state doesn’t require an annual tax from LLCs, which is different from a majority of other states.
3. Avoid Verbal Agreements
Since we are talking about business, there is no space for love and trust, without a backup plan. Your organization’s best interests need to be on your mind all of the time. So, having verbal agreements with clients or vendors is a no no. By signing a contract, you will be able to protect yourself in any possible scenarios. As we know, scams are pretty common. So, there is absolutely no reason why you shouldn’t protect yourself.
In case you didn’t know, some states recognize the verbal agreement as enforceable. However, that doesn’t mean that you can prove it easily in court. The conclusion is that you shouldn’t participate in a job or project without a contract that will protect your company’s best interests. Having a lawyer at your side will make this process much easier than it needs to be. So, be sure to have one at your side at every negotiation.
4. Be Careful About Taxes
As every business owner knows, laws can be pretty hard to follow sometimes. The reason is they can be complex, and they can change pretty fast. Plus, every small business experiences a lack of cash flow from time to time. So, a high percentage of businesses can fall behind on taxes. There are two main reasons for this occurrence. It can happen either for the inability to pay or not properly understanding the regulations.
We are pretty sure everyone knows this can be a source of many different problems for the company. Sadly, most of them can be pretty severe, like paying additional interests and penalties, criminal liability, or seizure of business or personal property. This is best seen in the example of online businesses that found themselves in a situation where they need to pay tax in a couple of states, all due to the sudden changes in regulation.
5. Proper Employee Classification
Surely you know that you can classify your workers in a couple of different categories? Surely, you know the difference between an independent contractor and an employee? It doesn’t matter how clear these differences are, we can see that many business owners make these mistakes over and over. What’s even more important to know is that making this mistake can bring some harsh consequences on the company.
The list of penalties your company can suffer for these mistakes is pretty long. In most severe cases, the business will need to repay wages for up to three years. This is a pretty hard blow for every enterprise, you can be sure of that. So, you need to consult your lawyer before you make any decision regarding this type of classification. It would be best to hire someone experienced in this field of law. That way, you will prevent these consequences in the best possible way.
As a business owner, you will have a lot of things on your mind every day. You are the person responsible for everything that happens. So, you should delegate some of the responsibilities to the most valuable members of your staff. Surely, one of the most important fields is the law. Here, are some of the essential legal things every business owner needs to be aware of. However, there is absolutely nothing wrong with delegating this to an experienced lawyer. Think about that.