Owning your own business can be a very financially and personally rewarding experience. However, while there are many benefits to running your own business, there are countless legal issues that could derail your company both with your customer base and the surrounding business community. Below is a list of the most common legal issues small businesses face and how to mitigate these disputes.
Licensing
Licensing your products or services out to other businesses is one of the most common causes of legal issues. To mitigate this occurrence, ensure that you are meeting your state’s specific requirements for this activity. The reason for this is that if you do not follow the specific state guidelines, you may have to pay additional fees that are easily avoidable. While the initial cost of properly licensing your product may seem steep, it is essential that you go through this process. One final note is that licensing fees are different for each state.
Employee Termination
While every business terminates employees, small businesses historically have a higher turnover rate as they do not have human resources departments dedicated to screening applicants. Thus, many small businesses hire someone they believe has the necessary qualifications and personal demeanor to help their company. However, the owner of the business quickly realizes that the new hire does not fit with the existing team or is not performing highly enough to justify keeping this person in their position.
There are a few important steps every small business owner should take to avoid wrongful termination lawsuits. First, create an employee manual and be very clear on the type of conduct that could lead to termination. Second, hire an attorney who can draft up an editable contract. Thus, when you do have to let an employee go, you can state the exact reason for your decision.
Business Entity or Structure
It may be easy to create the name for your dream business or decide on what products or services you are going to offer. However, choosing the proper business structure is much more difficult. How you legally register your business largely depends on who is involved and the type of business you want. Furthermore, the business structure you choose can open you up to personal liability. Additionally, the specific business structure you choose to utilize will also decide your taxes.
Misclassification
Another common mistake small business owners make is misclassifying employees. One example of this is when small businesses say that full-time employees are actually independent contractors. The reason why misclassification matters are that an independent contractor has different obligations and rights relating to taxation and benefits when compared to a normal employee. Thus, if you do classify someone working for you as an independent contract, make sure you follow state guidelines to ensure that this is their correct classification or risk major legal troubles.
Discrimination
One of the most easily avoided yet common lawsuits small businesses face regards discrimination. This is true whether the person claiming the discrimination originated because of their sex, race, age, or religion. While these are serious claims, the majority of these lawsuits are baseless. Thus, if a baseless discrimination lawsuit is brought against your business, immediately contact a lawyer to review the issues.
Final Thoughts
The issues above are the most common causes of small business lawsuits. However, there are many more legal issues that small businesses face each day. Furthermore, no matter which of these issues you may experience, you could experience detrimental financial effects. To avoid these possibilities, it is vital to speak with an attorney that has experience working with small businesses. Each one of these lawsuits could lead to financial ruin.
With over twenty years of experience working with small businesses, the attorneys at Antonoplos & Associates are able to assist clients with any issues they may face throughout DC, Maryland, and Virginia.
Contact Our DC Law Office for More Information
Finally, for more on five common small business legal issues, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding business law, check out our blog.