When it comes to small businesses, there are many different types of legal issues that can end up causing all kinds of confusion and other major hiccups in the long run. Thankfully, there are all kinds of different ways to help prevent something like this from happening.
Here are four important legal tips for small businesses to consider making note of.
*First and foremost, perhaps one of the most important legal tips for small businesses is to insist on written contracts. All too often, many entrepreneurs will value speed over accuracy in terms of being able to detail relationships with customers, vendors, partners, and employees. Verbal agreements are next to impossible to enforce; however, written contracts are much more effective at being able to address the obligations of each party, as well as explain how any and all possible issues that concern all of your products and services can be resolved.
*Another important legal tip for small businesses is to maintain proper records. In other words, you will need to verify that all of your organizational documents are in place. As a small business, you will be required to both create and maintain proper records, which includes items such as adopting resolutions documenting business decisions, maintaining the company’s bookkeeping, complying with federal and state labor, paying payroll and taxes, acquiring and maintaining licenses or permits, and safety and wage requirements. Always make sure that all of your business and personal finances are kept separate. Furthermore, you should also have an agreement implemented that covers factors such as voting protocols, management, restrictions on adding new owners, how owners will solve disagreements, and profit-sharing.
*One other important legal tip for small businesses is to adopt a buy-sell agreement. It’s rather likely that the ownership of your business itself will end up changing as time goes on, and a buy-sell agreement will help to provide for a more orderly acquisition of an ownership interest if an owner end up leaving the business. Furthermore, this kind of agreement will also work to address how the business itself will be valued whenever a trigger event such as a death, disability, employment termination, bankruptcy, divorce, retirement, feud between the owners, etc. occurs, as well as describes how the payout to purchase the leaving owner’s interest will actually be structured.
*Another important legal tip for small business owners is to take all of the proper steps in order to avoid litigation. Typically, litigation is something that should always be considered as a type of last resort, as something like this is extremely expensive and distracting, and in many instances, the best possible solution in order to avoid litigation is to negotiate any and all disputed matters. Litigation also oftentimes results from poor planning, execution, and documentation. Be sure to take the time to document all transactions with third parties, including disputes. In most cases, litigation can be the result of signing a bad contract and/or not coming to a full understanding of everything that you have signed.