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Small Business Legal Mistakes to Avoid
by Nyall Bakk
If you're a small business owner who knows little about the legalities involved with running a small business you're not alone. The Small Business Association recommends that small business owners take one if not several legal classes in order to familiarize themselves with potential legal issues. Not knowing where you stand in certain legal matters can leave you at a serious disadvantage. Get to know your rights so you can make smart business decisions.
Contracts or service agreements are a must for any small business. It is difficult to uphold a verbal agreement in court and therefore a well written service agreement can protect you and your business. The service agreement should clearly define all policies and agreements. It should provide protection for your company and its interests.
In each service agreement you should list in detail what your service encompasses. Be very specific and don't leave anything out. A signed contract is a very important legal document and can stand up in court. Also be sure to add what is considered an extra service and what the charges would be. Make sure that you don't leave anything out of your service agreement.
As a small business you may or may not have several employees working for you. The termination of an employee is a touchy subject but may be necessary at some point in time. You should be clear on employee termination laws and regulations.
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.
Even though you may have hired an independent contractor the IRS may consider their job to be that of an employee's. This means things could get complicated for you. Be sure to check what the IRS considers employee's jobs before hiring an independent contractor.
Sole Proprietorship verses L.L.C. - Under many state laws, founding partners are jointly liable for the debts and obligations in general partnerships. Operating a business as the sole proprietorship puts the owner in a vulnerable position.
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 - Even low-tech companies have intellectual proper issues that directly affect the long-term success of the business. Pay close attention to confidentiality and invention assignment agreements, registered trademarks, and copyright notices. Protect the company's trade secrets adequately.
Record Keeping - Improper record keeping can cause serious problems. Accurate accounting records are essential if the IRS is the least bit suspicious about the company's financial records. Invest in a bookkeeper or an accounting program to make it easier to keep account of your daily transactions. Also, organize files to be readily accessible in case of an IRS audit.
If you can't afford to hire an accountant there are many bookkeeping software packages that can make things easier on you. Be sure to keep all of your paper documents as well since they may be necessary should you be audited.
In any of the above situations you may find it necessary to contact an experienced corporate attorney. Almost all businesses at some point in time will need the advice or services of a professional. While most attorneys do charge a high fee, there are times when this is necessary.
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.
About The Author
Nyall Bakk runs several successful niche websites, as well as Advertising WorldWide - a resource for PPC traffic. Visit his website http://www.advertisingww.com