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Small Business Legal Mistakes to Avoid

By: Vlad Ehrsam

Small business owners make legal mistakes all of the time, which often results in the downfall of a company. Without the proper knowledge, business owners find themselves repeating the same mistakes. The SBA (Small Business Association) stresses the importance of ending the circle of disastrous legal errors by investing in Continuing Education business courses, or by hiring a business consultant.

There are many resources for legal advice and information available on the Internet. If you think that you need professional legal advice consulting a lawyer is the best course of action. But here are a few common legal issues that you may come across.

For most business transactions you want to create and sign a contract. Contracts or service agreements allows you to define what your services or products entail. Service agreements are an important way that you can protect yourself and your business. Don’t overlook this important aspect of small businesses.

Your service agreement should definitively state exactly what you’re agreeing to do and the specifics of that. It should detail the definition and scope of your service. You should also define what is not included in your service and if any extra charges may be applicable. Don’t leave anything out.

At some point you may need to hire or fire employees. Many small business owners are unaware of their rights and their employee’s rights. Even though you may only have one employee it is important that you are well versed in labor standards and other regulations. If you need to terminate one of your employees it is vital that you do it properly.

In order to avoid unlawful discharge law suits carefully select your employees and read up on the proper procedure for terminating employees. This may be a situation were you should immediately contact a corporate attorney.

Since labor taxes can be so high many small business owners choose to hire independent contractors. Independent contractors are required by the IRS to claim and file themselves. You may think this makes things much easier on you.

Use extreme caution assigning tasks to the company’s IC’s. Some projects can change the status of an IC to an Employee in the IRS’s eyes. If you’re uncertain as to what jobs classify as IC or Non IC status, visit your local state website or www.sba.gov for more information.

When starting your business you need to know how your business is classified. You may be a sole proprietor or perhaps in a partnership. Each of these designations carries its own legal ramifications. For instance as a sole proprietor you are vulnerable to legal action taken against your company.

A better choice would be to start a business as a limited liability corporation. This means that if your business is sued, any personal finances and funds can be excluded from the ruling.

Intellectual property issues should be of great concern to any business no matter what sector you are in. This means you need to understand copyrights, registered trademarks, invention assignment agreements, and confidentiality agreements. Protect your company and its property.

Accounting and record keeping are vital to any company. Failure to do so can get you into serious trouble with the IRS. Keep proper paper and electronic copies of all business transactions.

You may want to hire a bookkeeper or accountant to deal with accounting issues. If you can’t afford to do so be sure to take a course on business accounting to ensure you have proper records of everything.

Do your research and compare fees. The long term relationship you build with your corporate attorney will have its value. All businesses should make an investment in a “good” corporate attorney.

Be sure to find an attorney that you’re comfortable with since you may need his or her services in the years to come. It may be wise to meet with several attorneys before you choose one.

If it anytime you feel in over your head, consult with an attorney. Business owners can get themselves into very serious trouble without the proper legal knowledge.

Article Source: Main Articles

About the author: Vlad Ehrsam writes exclusively for Full Info on Business, there's a wealth of knowledge on the website, plus their free newsletter is well worth signing up for too.
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