Top 10 Legal Tips for Small Businesses

Top 10 Legal Tips for Small Businesses

Whether you’re just starting out or you have been operating for years, there are many legal obligations and issues that confront small business owners. This article will provide you with tips to ensure your business is legally protected.

Tip 1: File Originating Documents

For most businesses other than sole proprietorships and partnerships, certain legal documents must be filled out and submitted in order to initiate business operations.  If you are operating as a corporation, you need to file articles of incorporation, and if you are operating an LLC, you need to file articles of organization.  This doesn’t take much time, but is an essential step nonetheless.

Tip 2: Select a Viable Business Name

Ensure that your business name is different than the names of existing businesses that offer the same or similar products and services, particularly in the same geographic locations, in order to avoid confusion and potential litigation over use of another business’s trade name.  To do this, check state and federal name registries (secretary of state, USTPO, etc.) to see whether other businesses have the same or similar names.   Similarly, if you plan on creating a website for your business, you should also check domain name registries to see if the domain name that correlates with your business name is available.

Tip 3: Obtain All Necessary Licenses and Permits

Many businesses require some form of license or permit to operate, whether they are issued a federal, state, or local government.  Research the requirements for your business, and then obtain all necessary licenses and permits.

Tip 4: Adopt Governing Documents

The structure you choose for your business may determine the type of governing documents you need to have in place, such as operating agreements, bylaws, etc.  Whether they are legally required or not, written operating agreements and bylaws should be adopted for every business. These documents identify and set out the company’s structure, ownership, voting rights, responsibilities of directors, day-to-day operations, how profits and losses will be treated, and more.

Tip 5: Implement Written Contracts and Agreements

Many small businesses make the mistake of operating without written contracts, preferring to do business “on a handshake.” This is a recipe for disaster.  Having written contracts helps all parties understand their rights and obligations.  Prepare and implement them.

Tip 6: Market Properly

There are many legal issues that arise relating to the way businesses market and advertise their products and services. These are governed by the Federal Trade Commission (FTC) and also by state and local laws.  The most basic rule with regard to advertising and marketing is that you cannot use deceptive practices to market or advertise.  Do not run afoul of it.

Tip 7: Protect Intellectual Property

Intellectual property is defined as creations of the mind. Every business has some intellectual property, whether that is the secret recipe for your restaurant, the special method used for creating your product, or simply your business name or logo. There are specific steps you must take in order to protect your business’s intellectual property, which can be protected through copyright (written and artistic content), trademark (logos and slogans), or patent (inventions).  Take those steps—or someone might misappropriate your intellectual property, and, ultimately, your business.

Tip 8: Comply with Employment Obligations

If your business has employees, you will need to ensure that your business complies with a myriad of federal and state employment laws.  For starters, you must pay employees at least minimum wage (including overtime, when applicable), operate a safe workplace, and treat employees fairly.  If you are not interested in having employees but need help operating your business and are willing to give up some level of control over those that work for you, then independent contractors should be considered—but they too come with their own legal issues.

Tip 9: Get your Financial Matters In Order

First, open bank accounts and obtain credit in the name of your business, and keep those accounts separate from your personal accounts. Failure to do so may result in a court finding that your business is not a separate legal entity, resulting in you becoming personally liable for debts or lawsuits against the business.  Second, ensure you pay all necessary taxes—employment taxes, income taxes, sales tax, etc.  Third, get insurance.  Certain insurance (auto, worker’s comp., etc.) is usually required by law in order for you to operate your business, but other forms of insurance, while not legally required, are typically be advisable. Fourth, manage your receivables.  If someone doesn’t pay you and there’s no basis for the non-payment, pursue them—either using a debt collector or an attorney.

Tip 10: Adopt a Recordkeeping Program

As your business grows, you will have to maintain accurate books and records for your business. A common issue for small businesses is failing to maintain the required records.  These records may include minutes of corporate meetings, stock certificates, financial statements, payroll documentation, injury logs, etc. Adopt a record keeping program and follow it.

Regardless of the type of business you operate, you need a trusted attorney to help you wade through the many legal issues you will encounter in the operation of your business.

Written by: Matthew Horn, Esq. is the President and Co-Founder of Legal Services Link, a leading online platform connecting those with legal needs with attorneys interested in satisfying those needs—at the click of a button. He holds a BS in Accounting from the University of Illinois, Urbana-Champaign, and a JD from The John Marshall Law School.


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