6 Legal Mistakes That Set Up Businesses For Failure

Susan Parker By Susan Parker, 3rd Jan 2017 | Follow this author | RSS Feed | Short URL http://nut.bz/e9wtzo60/
Posted in Wikinut>Business>Law

Your business pursuits can quickly become nightmares if you fail to realize and work within the legal realities that can make or break your new business.

Tips to stay safe with the law

Your business pursuits can quickly become nightmares if you fail to realize and work within the legal realities that can make or break your new business.

Most people look at legal issues as a burdensome cost of doing business and try to circumvent or ignore it. That’s a wrong approach that often backfires. Instead, you should look at the law as a tool to be leveraged to further your goals and position yourself and your company for success. Spare yourself unnecessary grief by avoiding these 6 common legal mistakes for small businesses.

1. Blurring the Lines Between an Employee and an Outside Contractor

There are pretty specific laws regarding this. Many businesses try to “get away” with having only outside contractors. The reason? They do not have to do the whole payroll taxes thing. In general, if you have someone who performs the same tasks for you on a regular full-time basis, you have an employee, not an outside contractor. But these laws are complex - get an attorney to make those determinations for you.

2. Not Researching Your Company or Domain Name

Many a lawsuit has been filed because a business owner selected a name for his business or his domain that was too close to that of another already in existence. This can be avoided by searching a domain and/or company name online. Even a slight variation can bring trouble. Business and domain names are trademarked and copyrighted. There is a very famous case of a restaurateur, Tom Colicchio, who has taken several other similar establishments to court and forced them to remove the work “Craft” from their business names.

3. The Whole Stock Thing

If you are established as a corporation with stock, there are all sorts of laws that impact how you sell or gift that stock, to employees, to anyone. If not done right, there are tax penalties for both you and the grantees. Get an attorney to handle this for you.

4. Not Having Employee Policy Manuals

According to Salt Lake social security disability lawyers, when you employ others, you must have policies that relate to their behaviors while on the job. These must be in writing, and every employee must sign off on them. If you don’t do this and then you attempt to fire an employee for not following your “unwritten rules,” you can face a wrongful termination lawsuit.

5. Not Following Labor and Other Employment Laws

As your business scales and you continue to add staff in any capacity, there is an entire body of labor law that will impact you. You need to understand your obligations as an employer. And you need to abide by OSHA requirements for safety and health in the workplace. Big penalties and fines await you if an employee files a complaint and you are not “covered.”

6. Making False Claims About Your Product or Service

Companies often exaggerate the benefits of their products or services. However, if it is overt, you are legally liable. One of the most famous cases was that of Listerine Mouthwash. The company claimed that it destroyed 99% of bacteria and germs in the mouth. A competitor proved them wrong and they had to pay a penalty and change their entire marketing strategy – a pretty expensive mistake.

These are only 6 of the legal “landmines” you may encounter as a small business owner. And most of these relate to national laws and regulations. And Ignorance will never be an excuse. Your best approach is to get an attorney early on and to keep that attorney available as you scale.


Legal Mistakes, Small Businesses

Meet the author

author avatar Susan Parker
I am a writer, business consultant and graphic designer. I write about the relationships between business, life and personal development.

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