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5 Tips for Protecting Your Small Business Against a Legal Fallout
by Melissa Thompson
June 13, 2024
Signing a contract

As the owner of a small business, you probably fulfill a number of other roles, including developer, salesperson, and customer representative. Of course, the ultimate goal would be to outsource a couple of these responsibilities or even hire your first employees, but scarce resources can sometimes put an end to this dream.

Regardless of how busy you are, you’ll want to take the time to avoid one potential business pitfall: legal fallout. Small businesses must adhere to the same laws as multinational corporations, and no company is immune to legal issues. To sidestep them, you may not need to hire a lawyer, but you’ll want to know the law behind specific business practices.

With this in mind, I’ve compiled five tips for protecting your business from a legal standpoint.

Use Written Agreements

Sadly, far too many owners of young companies trust the word of others these days, and this is a recipe for disaster. Whenever you start a relationship with another party – whether it’s a service provider, business partner, or client – make sure that all terms have been agreed upon and confirmed in a written contract. This way, all disputes can be resolved by assessing the contract.

Keep Up-to-Date Paperwork

After creating the necessary paperwork, you’ll then need to make sure it’s updated whenever changes are made. If you find it hard to keep on top of your tax documents, for example, it might be worth investing a little money into hiring an accountant. If you run into any legal challenges or questions, a couple hundred bucks isn’t much to pay to avoid or fix problems that might arise.   

Hiring a professional will give you peace of mind should your business be audited. If you ask the accountant to show you easy ways to maintain your paperwork, you may only need to hire him or her a couple of times per year.

Do Your Research

Ultimately, the more legal knowledge you have, the better. You can find a wealth of information on different business-related websites, including the U.S. Small Business Administration website. Here is some basic information from the SBA that you should know:   

Intellectual Property – According to trademark attorney Perry Clegg, “If your business has invested in intangibles such as inventions, content, designs, or marks or logos that uniquely identify your business or products, then you will want to take steps to ensure you get a return on that investment. Consulting with an experienced intellectual property attorney early on will allow you to plan, reduce intellectual property costs, and improve the strength and quality of your intellectual property over the long term.” This will be particularly important in the beginning because it will allow you to stay protected when you are trying to establish a position in the market. An intellectual property attorney should be able to prevent competitors from using your intellectual property, which helps you protect your brand.

Financial – Whether you are focused specifically on your business, customers, or investors, you’ll need to be aware of the basic financial laws involved.

Employment and Labor – When hiring employees, the process can actually become very tricky, and some small businesses fall foul of the laws simply because they aren't aware they exist. In addition to addressing hiring issues, employment and labor laws also cover work practices and the correct procedure for terminating employees.

Marketing and Advertising – Misrepresentation, or misleading (false) advertising, can result in legal action, so it’s important to know the law. Understanding marketing and advertising legal standards will allow you to advertise with confidence, knowing you won’t get into any trouble.

Register Intellectual Property

For online businesses these days, intellectual property is vital. Often, the line between theft and creativity can get blurred, so you’ll need to put in extra effort to make sure that all of your ideas, designs, and processes are protected. Registering your trademarks and copyrights provides legal presumptions that clarify your IP ownership. While not the only way, certainly one of the best ways you can protect your intangible property is by securing trademark, copyright, and other intellectual property registrations.

Obtain Legal Advice

There should be no “winging it” when it comes to something as important as your business. If you are unsure of a contract or have any doubts regarding your business, a lawyer will be able to step in and read the situation. He or she will be able to explain contracts and specific terms within a contract that you may not understand. Ultimately, there is no shame in seeking help, but there is shame in not asking for help when it is required.

Because lawyers are plentiful, you should have no trouble finding one, including someone who specializes in your industry. Once you find a competent lawyer specific to your business needs, you can be confident that your business is in good hands. Although it should go without saying, you also need to make sure that your attorney is fully licensed to operate within your state. If you are unsure, a quick check with the American Bar Association will do the trick.

There you have it, five simple tips that will – hopefully – help keep you from entering lengthy and expensive legal battles. As long as you follow these suggestions, your business has a good shot at a prosperous future free of major legal concerns!

About the author
Melissa Thompson
Melissa Thompson is a freelance producer and has worked at CNN, USA Today, and is currently the Editor in Chief of Harcourt Health. She writes about small business, social media, marketing, and productivity and is passionate about promoting a healthy lifestyle.
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