Keeping Small Business Safe from Legal Threats

Whether starting a new business or managing an existing one, “winging-it” isn’t the smartest approach. True, miracles do happen and enterprising entrepreneurs with fantastic ideas do become millionaires overnight – but not often.

In fact, disasters happen just as often – disasters than could be avoided with the counsel of a business attorney. A commercial lawyer will offer proactive planning for the business launch and provide safeguards against the consequences of unexpected future events.

There are many legal issues that need to be addressed when running a business, from legally structuring the company and shielding intellectual property, to creating contracts and steering through employment rules. It’s critical to have a lawyer who can anticipate every possible twist or turn and who knows how to react to each development.

“If you fail to plan, you are planning to fail,” noted Benjamin Franklin.

The shrewd first step in establishing a busi- ness is to bring an attorney on board. While it’s a financial strain to hire anyone when forming a business, much less an attorney, the investment will be invaluable. Going it alone can result in missed opportunities, business interruptions, expensive liabilities and the potential for legal action.

In fact, it doesn’t matter how great a business idea is unless it’s protected up front. Forming a company can be a very complicated legal process.

Initially, a business owner will need to determine if the company should be registered as a sole proprietorship, general partnership, LLC, LLP, or corporation.The entity that is best will depend on the company’s ownership, products and services, geographic location, and other factors.

It’s important to understand that laws governing these different business forms vary, especially in areas such as personal liability for business debts and tax obligations. Different business structures provide different protections and risk to the business owner.

When a business is at risk, the owner may be personally liable thus jeopardizing everything he owns. Not only that, if an employee or partner puts a business at risk, the business owner also may be personally liable.

Furthermore, each business form has specific parameters for raising capital and making distributions, and tax advantages and disadvantages differ with each entity.

An attorney can help a business owner decide which type of corporate structure is best for his needs and type of business. Based on the lawyer’s advice, it may be wise to consult an accountant for additional guidance.

depositphotos_6841701Once a business is up and running, there are other precautions to consider. Business owners who want to protect their ownership of the ideas, images, and processes they’ve created will need the services of an attorney.

After all, a business is defined by its brand and the intellectual property that illustrates that brand. These intangible assets include a company’s name, logo, catchphrase, brand names and distinctive goods and services. All are entitled to legal protection.

Intellectual property also includes proprietary designs, discoveries, inventions, processes, symbols, music and other private, business-related information. These assets are what provide a business with its competitive or economic advantage.

Because no company wants to have its secret sauce stolen and copied, an attorney can provide legal protection for exclusive information and products.

Trademark, copyright and patent registrations help a business protect those things that differentiate it from its competition. These safeguards offer important defense against theft. When intellectual property is copied or stolen, a company’s brand is compromised. An attorney can ensure a business owner never faces that issue.

For company owners, contracts are a way of life. Owners will do business with many people: landlords, suppliers, service providers, customers, independent contractors and their own employees. Many of these transactions will require written contracts. An attorney can help with drafting and negotiating contracts that ensure a business will not be put in jeopardy.

Employment contracts can be particularly tricky. Legal protections, liabilities and relationships will vary depending on the working relationship. An employee contract details the terms of employment including pay, benefits and full or part-time status. The employee works for the business detailed in the contract. Today many businesses also hire independent contractors. Because an independent contractor is exactly that – independent and not an employee – the terms of an agreement will be quite different.

Other legal documents include an employee handbook, a confidentiality statement, and non-disclosure and non-compete agreements. A lawyer who knows small business operations will be able to review and negotiate beneficial contracts and employment materials.

When a dispute arises with an employee, former employee, independent contractor, supplier or service provider, an attorney can help with litigation or alternative resolution methods. While a jury trial might be necessary, often another option will work better. Arbitration or mediation with a neutral third party may be recommended, or negotiation between the parties with the assistance of an attorney.

An increasingly sensitive area of concern for small business owners is environmental stability. Issues can arise from manufacturing, waste disposal, emissions, and the development of raw materials. The misuse of cleaning or construction materials within an office area can lead to air quality concerns. Business owners must be aware of and address everything from indoor environmental exposure to the use of hazardous building supplies. At times, a business may not be directly involved, but could still be affected.

The consequences for individuals who violate environmental statutes can be serious. An attorney will be a company owner’s advocate in resolving claims of liability or negligence.

At some point, every business owner must sell, close or pass his business along to partners or family members. It’s best if a succession plan is created early in the life of a business to help prevent potential financial and legal issues and ensure a smooth transition.

Contingencies and plans can be put in place before a sudden issue arises. In addition, owner and business estate plans will ensure the legal distribution of a business in the event of the owner’s death or divorce.

When a business needs to be sold, a number of tax and legal obstacles will need to be addressed, not to mention a list of federal, state and local regulations to consider. Internal and external contracts may need to be negotiated. If buy-back or buy-sell agreements are in place, partners will be able to sell their interest without legal predicaments.

However, this event may come unexpectedly as a result of an accident or death. If a succession plan hasn’t been put in place, the future of the company will be in jeopardy. A business attorney can manage the succession or sale.

The best time to hire an attorney is before one is needed. A qualified business attorney can be a small business owner’s ally in navigating a maze of legal issues. True, retaining an attorney can be costly. Yet, not retaining an attorney can cost a business even more.

Take the time to protect your business from legal vulnerability. You can find the name of a qualified professional in your Chamber directory. Make that call today.