Updated February 2018
Creating a business around doing what you love is truly fulfilling for most entrepreneurs. There are, however, some legal aspects of running a business that can be frustrating and, at times, downright perplexing. After all, you’re a small business owner, not a legal expert. Still, you’ll need to navigate corporate compliance issues, intellectual property laws, taxes, regulations, corporate liability, and countless other legal issues as you start and grow your business. With so much to learn, how do you know where to begin? It’s best to talk to a lawyer and get advice for your unique business needs, but it also helps to know what issues to discuss with your attorney.
To help you start the conversation, here are 10 questions you may not know to ask. Jot down some notes because the answers to these questions are essential for building and running your business.
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1. Why is it important to keep business records?
Small businesses are required to maintain a number of receipts and records for tax and corporate compliance purposes. Depending on the nature of your business, some documents may help limit your liability in the event of a lawsuit. In addition, some of the other paperwork generated by your business will prove incredibly valuable later on because it will allow you to analyze the growth of your business and the efficiency of your operations. As a result, it’s important to ask your attorney what type of records and other documents you should be generating and maintaining as part of your business operations. It’s much easier to keep the right records from the beginning than try to find or recreate them later.
2. What are my risks of getting sued as a small business owner?
There is some risk of a legal action inherent in any business venture. However, it’s not always clear what those risks are. And, of course, some businesses are at higher risks for litigation than others (for example, running a skydiving business is obviously going to be riskier than working as a freelance blogger). In addition, lawsuits can arise in a number of contexts. Small businesses can face lawsuits from employees or former employees; allegations of trademark infringement; and/or disputes in the buying or selling of goods or services (to name just a few possibilities). The first step in avoiding a lawsuit is to recognize where you’re most at risk and then taking steps to minimize or sidestep that risk altogether. Unless you’re a lawyer yourself, you’ll probably want to seek the advice of an attorney to identify those liabilities.
3. What happens if I get sued?
Even if you do everything right, there is still a chance that your business will be confronted with a lawsuit at some point in time.
In general, you’re at a higher risk if your business takes off. The more employees you have, the more customers/clients you have, the more activities you’re involved in, the greater the risk of your business being sued. If you’ve never been sued before, you probably don’t know the best way to respond to a complaint or threatened lawsuit. For that reason, you’d be prudent to work with an attorney to create a plan for dealing with lawsuits–before they happen.
4. Can I use personal assets in running my business?
For many small business owners, the line between personal and business is easily blurred. After all, your business is your passion, your hobby, and your career all mixed up into one. Despite this challenge, it’s important to keep your business and personal assets separated. Even seemingly innocuous activities like paying for office equipment with your personal credit card could lead to putting the personal assets that you and your family depend on at risk. Indeed, if you treat your personal and business assets as one and the same, why shouldn’t a creditor or court? Your attorney can help you establish the best ways to transfer assets to and from your business.
5. What should I consider before taking on investors?
If your business shows the potential for growth, you may have the option of accepting cash from outside investors. For some businesses, investors are the only way your business can grow. Investors can provide small businesses with case, connections, and valuable knowledge. However, the decision to take on investors shouldn’t be taken lightly. Most investors aren’t going to give you money out of the kindness of their heart. There will be strings attached to the money you’ll receive, and it’s important to understand how that will change your business and the autonomy you enjoy as the owner of the business.
6. What qualities make a company good to work for?
Believe it or not, most employees are interested in more than just a good paycheck and a steady job. Employees blossom when given autonomy, respect, and room to breathe. But as important as it is to be a good boss, good employee relations begin at hiring. It’s important to work with your attorney to implement best practices before you take on new team members. This includes, but isn’t limited to, defining company HR policies, creating the right paperwork (like an independent contractor and employment agreements, non-disclosure agreements, termination letters, etc.), and making sure you follow through with every worker, every time. Since what you need depends on the type of worker you want to hire and the type of business, a lawyer is the best resource for putting together a comprehensive plan to hire and retain top talent.
7. How can I protect the name of my business?
Regardless of the nature of your business, its reputation is almost certainly its most valuable asset. For that reason, you’ll want to protect your brand from copycats and competitors. An attorney can help you register trademarks for the brand name, logo, and other identifying characteristics of your business and help you handle any possible infringements against your brand.
8. What happens if my business grows rapidly or tanks suddenly?
In business, there is no sure thing. Your business may surprise you and experience unexpected growth, or, conversely, could stumble and go under suddenly. For that reason, it’s wise to plan ahead for either scenario. An attorney can help your business enjoy a balance of flexibility and protection. For example, when you complete your incorporation paperwork, you want to structure your business so that it can evolve and grow in potentially unanticipated ways.
9. How do I make sure my business is compliant?
Every business and every industry is faced with complying with numerous local, state, and federal laws. Failing to comply with those laws can lead to fines, penalties, corporate liability, and even personal liability. So how do you determine what those laws are and which laws apply to your business? Unless you’ve been through this before, it can be difficult to make sure you haven’t missed an important law or regulation. The laws which apply to your business will vary depending on the entity type you’ve chosen for your business, the state where you’ve incorporated, and the location(s) where you conduct business. As a result, it’s important to consult with a knowledgeable professional in order to make sure your business is compliant.
10. How do I plan ahead for my family?
Many small business owners dream of passing on their business, or the business’ assets, to their family someday. But, depending on the structure of your business (and your family), that isn’t necessarily as easy as you might think. An attorney with a background in estate planning can help you make sure your business is protected and can be passed to your family.
Again, every business is unique. As a result, the issues affecting your business will vary. Whether you have a quick question you can ask a lawyer or need more legal guidance, speaking to an attorney can help you identify the issues that confront your business. We also have help centers from starting your business and running your business.