Entrepreneurs from all walks of life pursue their dreams aggressively. To steer a great idea into the waves of the business world successfully takes ingenuity, innovation, patience and work ethic. However, it’s vital to also know the rules, regulations and restrictions that will be faced as young businesses grow.
If your business has just started or is in its planning stages, then continue reading to learn about 5 legal tips you simply cannot ignore.
1. Always Get It in Writing.
Every agreement and arrangement in the world of business should be verified through a contract, document or other form of written agreement. This applies to contractors, vendors and even your employees. The most basic form of legal protection any young business can have is to have all terms, conditions and arrangements outlined in writing, with signatures from all involved parties.
While it can be easy to get comfortable with individuals over time, never abandon your responsibility to get it in writing.
2. Select the Best Business Structure.
There are many different business structures out there, each of which provide tangible benefits to entrepreneurs when used properly. However, it’s important to verify that the business structure you’ve agreed upon is legally sound for your business.
For example, a sole proprietorship may be sufficient when first forming a business, but as your success grows and your business acquires assets, protecting those becomes a priority. An LLC may then be the best business structure for your needs (Want to know more? Here’s how to get an LLC started).
3. Secure Appropriate Insurance.
Depending on your niche and focus, your business could be in a high-risk field. Enjoying protections when running a young business in resource extraction or fishing is a must-have, but every business could find itself open to lawsuits (frivolous or otherwise) with just one wrong move.
Some jurisdictions even require businesses to be insured in select situations, but your young business will want to invest in liability insurance, workers’ compensation insurance, vehicle insurance and property insurance, depending on your exact business model. Not all businesses will require the same forms of insurance: click here to see the types of insurance available to businesses.
4. Consider Legal and Financial Retainers.
In the event of the worst happening, and you find yourself facing a lawsuit, having legal representation on-hand and ready-to-go is paramount. A legal retainer is a sound investment; for a recurring fee, you’ll be guaranteed a lawyer’s services if and when disaster strikes.
A financial retainer is also a good idea; if you suddenly are facing audits or scrutiny from state and federal tax agencies, having an accountant or tax professional on-board who can sort through the mess will make life easier.
5. Know Your Employee Laws.
If you’re not a sole proprietor, then knowing the laws regarding employee hires, treatment, compensation and other factors is crucial. Being aware of the differences between independent contractors, temporary workers and full-time employees, ensuring the right documentation and hiring processes are followed, and deducting appropriate taxes for each hire are just a few examples of what you’ll need to know.
The United States Department of Labor provides entrepreneurs with an employment law guide that helps familiarize business owners with many of the most important labor and employment concerns. Beyond that, it is recommended that you contact state authorities for more information on state-level employee law (as there may be additional local requirements and regulations not covered in federal law).
Starting a new business is stressful – but the legal minutiae you must navigate after it’s up and running can be even more so. These legal tips can help you move in the right direction and avoid running afoul of the law during day-to-day operations. Keep these factors in mind and make sure your young business is on the right side of the law!