Everyone knows that setting up and running a small business is a lot of hard work. Especially since you need to comply with all the rules and regulations. This means dealing with taxes, protecting intellectual property, ensuring workers have the right contracts, and more. All the while, you have to deal with the joys of bureaucracy, red tape, and a big pile of paperwork.
Of course, not doing everything correctly may result in penalties, fines, and lawsuits. These could have a huge impact on your business. Indeed, 36% to 53% of small businesses are sued every year with resolutions costing anywhere from $3,000 to $150,000. However, using the right legal services and software will significantly reduce that risk and help your business grow.
Most Common Legal Issues for Small Businesses
Of course, there are a lot of legal problems that small businesses face, but there are a few issues that happen more frequently. Some new companies even make mistakes from the beginning by using the wrong business entity, which means your business could end up paying the wrong tax. For example, in an S-Corp business taxes are paid by the business owner and not the company itself. Meanwhile, if your business is a sole-proprietorship it increases your personal liability, which is why companies often choose an LLC structure instead.
Then there’s the day-to-day running of your business, and many companies struggle with employee management. Small businesses generally don’t have HR departments, so staying legal while hiring and firing employees is difficult. For instance, when employees are misclassified, this can result in payroll issues and impact a worker’s compensation and benefits. When it comes to dismissing employees, there’s a lot to consider too, such as anti-discrimination laws, immigration status, and contract violations. Any of these can come back to bite you in the future.
Recommended Legal Services
There are plenty of online services that offer small businesses help to stay within legal parameters, each with its own specialties. Here we recommended some of the best solutions for small businesses on the market.
Tax Calculation and Filing: TurboTax
Business Formation: BetterLegal
BetterLegal has been the guardian angel of hundreds of businesses since 2017. The company excels in key areas, such as offering one of the fastest turnaround times on the market – two business days on average – and having barely any upsells and advertisements. On a similar note, pricing plans are straightforward and only provide customers with the services they need. Moreover, BetterLegal’s trustworthy registered agent services do practically all the tedious work for you. Whether you want to form an LLC or a standard corporation, the company provides qualified guidance throughout your journey. Read our BetterLegal review.
Business Maintenance: MyCorporation
On top of incorporation services, the California-based company also offers a broad set of maintenance features, with one of its highlights being a unique package called MaintainMyBiz – a handy service that grants owners four optional filings every year, which include annual reports and DBA registrations. In addition to the standard registered agent service, users can enjoy a business compliance package to stay compliant with regulators and state laws. But that’s not all, as you can also incorporate a payroll management service – a must-have for any business with a growing number of employees. All in all, MyCorporation’s team of experts will act as your right-hand man, guiding your business on its journey to the top. Read our MyCorporation review.
Legal Documents Online Library: US Legal Forms
Legal Documents To Start and Run Your Business
While it’s not the most glamorous part of running a business, paperwork is unavoidable and it’s important to have everything in order. Firstly, you need a business plan, and while this isn’t a legal requirement, it’s necessary to have a plan showcasing your road map to success in order to secure financing.
When it comes to your employees you must make sure you have the right documents. Contracts are especially important, and you need to carefully consider what to include in them, like benefits, time off, confidentiality clauses, noncompete clauses, probationary periods, non-disclosure agreements, and more. Also, you need to consider having an employee handbook, allowing you to set expectations and help new employees succeed in your company. In the handbook, you can lay out your company policies, terms of employment, and code of conduct.
Legal Tips for Small Business Owners
Juggling everything is difficult, but there are a few things you always need to focus on. One of the most important of those is your employment obligations as you must ensure your workers are safe and follow labor laws.
Every business should always protect its intellectual property. That certainly true for small businesses for many it counts a large part of its corporate value – counting up to 70% for some. And since your product is what makes your business unique, it needs to be protected. Intellectual property covers copyrighting exclusive content, registering trademarks (including designs, symbols, and phrases), patenting inventions, and more. But you have to remain vigilant and consider that you may have to send takedown notices, cease and desist letters, or even sue copyright infringers at any moment.
You need to pay attention to your records too, especially when it comes to your stock levels and the IRS. Online accounting software gives you the ability to track everything in your inventory and is certainly far easier than relying on manual record keeping. Similarly, using tax software to ensure that your business’s returns are done perfectly will save you a headache and help you avoid any potential penalties.
Additional Advice for Small Business Owners
Legality is just one of a large number of factors small business owners have to consider. One of the other big challenges is staying on top of your company’s finances. Fortunately, there is financial software available to help you keep track of your spending and avoid necessary losses. But you also need to rely on your employees to help take your business to the next level, so you can invest in productivity software that will help them perform to their very best.