Important Legal Tips for Starting a Small Business

Small business owners can run into a wide variety of legal issues that aren't normally encountered with partnerships or corporations. This is due to the fact that many owners retain sole ownership of the business. And this sole ownership, without a corporate structure, often leaves small business owners open to personal liability issues. To avoid having business issues affect your personal non business related assets, there are a few legal tips you should follow when getting your business off the ground.

Ten Legal Tips for Business Safety

Running your small business means having to deal with a number of legal concerns. To avoid costly mistakes, remember these important legal tips:

1. Make certain your contract workers are actually considered contractors and not employees. The IRS treats contractor and employee payment differently. To ensure those working for you are considered contractors, make sure they sign an agreement that states their status.
2. Pay all of your bills on time to avoid fees and lawsuits.
3. Pay payroll taxes on time to avoid being held personally liable.
4. Make sure your contracts are legally binding by having them all in writing. This includes receipts for goods and services.
5. To protect your personal assets, purchase business liability insurance, limit company debt, incorporate your company, or form a limited-liability company.
6. Perform a trademark or patent search for all brand names or products you wish to bring to market. This will avoid hefty bills should a product contain a patented device or process and will also eliminate the frustration of having to rebrand a product and then reestablish its new name in the market.
7. Protect your company's integrity by having employees sign a noncompete agreement upon hiring. This will prevent them from using your company's trade secrets. It's also a good policy to have employees sign an arbitration agreement so that you can handle employee-employer issues through an arbitration process rather than through a lawsuit.
8. Provide terms of services agreements for customers detailing your precise obligations and the customer's rights with a product or service.
9. Make certain you read the fine print of any contract before signing it as well as the terms of service agreement of any product used in your business. This can avoid unexpected costs and future product restrictions.
10. Find a trustworthy lawyer, familiar with your particular industry, to handle common legal issues. It's also important to seek quality legal advice during a conflict with a partner, customer, or vendor to limit your legal liability.

How To Avoid 3 Common Legal Mistakes Small Business Owners Make

1. How To Choose The Right Business Structure: Sole Props, LLCs, S-Corps

When deciding on what the right structure is for your business it’s important to seek the advice of an attorney and a tax professional. Things to consider:

1.Your personal tax circumstances – examples: Are you married? Have children? Own property?

2.The filing costs – If you’re having a cash flow concern this could be a determining factor when choosing a business entity. Some are entities are relatively inexpensive to file while others can be more costly. Have your attorney review the potential costs for any entity recommendation.

3.Ease – Some entities will require yearly maintenance and filing, while others do not. If you’re a person that prefers not to deal with the hefty paperwork you may want to discuss with your attorney an entity option that requires less paper pushing.

4.Tax benefit vs EVERYTHING else – Speak with your tax professional about the tax percentage benefits versus all the other factors (like those listed above) when choosing the right entity. It may be significant enough, it may not. Once you know the benefits, weigh them against the liabilities so you can make an informed decision.

Here’s a quick list to weigh the pros and cons of the entities primarly used by online business owners (note: this is not a comprehensive list of all the available business entities).

Sole Prop

Advantages – Little to no paperwork. Low maintenance. Affordable.

Disadvantages – No legal protection for your assets. No tax benefits. No opportunities for growth or expansion.

S-Corp

Advantages – Protection for your personal assets. No double taxation. Tax benefit. Heightened credibility with customers, clients and vendors. Opportunities for growth via shareholders.

Disadvantages – Formation and ongoing fees can get costly. May be heavy on paperwork. Higher IRS Scrutiny.

LLC

Advantages – Protection for your personal assets. Easier filing and management requirements. No filing a separate business tax return.

Disadvantages – No tax benefit (you’re taxed at your personal tax rate). However, some states and the IRS may let you get taxed as an S-Corp.

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Lexington Doc Prep Services

For low-income owners of small businesses (or those who want to form a business), lexington doc prep can provide the sound legal advice that is essential for success in business and preventing costly troubles that can ruin an enterprise.

lexington doc prep provides assistance with transactional business matters.   It does not provide assistance with litigation, although it can arrange advice and assistance that could prevent litigation.

Here are examples of legal issues in which lexington doc prep can provide advice and/or assistance:

• Choice of legal form of organization, and formation of (for-profit) organization
• Intellectual property – copyright, trademark, trade name, licensing, patents
• Contracts and commercial leases
• Taxation
• Government regulation
• Employment
• Franchising
• Risk management
• Real estate
• Director duties and internal organization
• Commercial debtor/creditor rights and options
• Other legal issues not involving participation in litigation