When you decide to start your own company, you’re excited, energetic, and determined to make things work. However, only a small percentage of entrepreneurs have the knowledge to navigate the sinuous maze of the legal world that rules small businesses. Depending on the size, nature, and structure of your new company, as well as its location, the laws can differ widely from one case to another.
Getting solid, reliable legal advice for small businesses is something you should address before even opening the doors. In this way, you can eliminate trouble even it can start. Every new startup is a risk, so it’s essential that you reduce risk by getting the counsel you need to protect yourself and your partners from any personal liability. Otherwise, business obligations and debts can not only close the company prematurely, but they can also affect your personal assets as well.
Here are six essential reasons for pursuing legal advice for small businesses before launching your business.
1. Comply With Applicable Laws
As a new small business owner, you’re excited about the thought of bringing your idea to the world as soon as possible. However, you may not be aware of the corporate laws and business regulations in your state or city of operation.
Before getting started, speak with an attorney who specializes in legal advice for small businesses. Upon that advice, you’ll be able to develop a plan of action that complies with all the applicable regulations.
For example, you may be required to apply for a business license because of your industry and location. You may need to hold multiple licenses for different jurisdictions. For some service businesses, you may be required to qualify for a state professional license.
Consulting a competent and experienced lawyer will result in a comprehensive plan of action that protects your business. Your legal adviser can ensure you’re in compliance with the law.
2. Keep Detailed Financial Records
For some professions, fiduciary responsibility is a solemn and essential part of the business model. Some professions may be required to keep more comprehensive financial records and special accounts when dealing with other people’s money. Examples would include real estate brokers and financial managers.
These requirements are often more than just regulations; they’re state laws with very narrow margins for error and very stiff penalties.
An attorney who specializes in legal advice for small businesses in the financial sector can provide insight and oversight for setting up escrow accounts that comply with state laws. There are often legal consequences for breaking these laws, with fines that can put you out of business and punishments that can end your career.
Setting up strictly regulated accounts for doing business in the financial sector is not the time to skimp on legal advice.
3. Select the Right Business Structure
When a small business owner is excited about starting their venture, they may rush through the incorporation process in an effort to expedite the process. However, they may not understand the ramifications when doing so. Easy online access to legal forms doesn’t guarantee that a small business owner thoroughly understands the consequences of their decisions.
When rushing through the incorporation process, you may incorrectly determine whether your business is a partnership, a sole proprietorship, a corporation, or a limited liability corporation. Each has distinct advantages, but your business structure may mean that you can only choose one or two of these options.
It’s also important because your corporate structure is defined by how you assign liability for all actions made by the business. If you choose the wrong one, you could end up financially liable for a mistake made by a business partner. It also means your family could lose their home due to a poor business decision.
Seeking timely legal advice for small businesses will help you to avoid the pitfalls of filing incorrectly.
4. Avoid Complications with Contracts
Regardless of the type of business, contracts may often come into play. From hiring employees to working with vendors, your company may need contracts to secure supplies and workspace. Your small business may also need to use them for investors and partners.
Make a small mistake on any of these contracts, and you may find yourself fighting to save your company in court.
Even if you use boilerplate contracts in your business on a regular basis, make sure you access legal advice for small businesses to ensure that your contracts comply with the laws of your state and best serve your interests. Your legal adviser can point out any possible loopholes and provide guidance for covering any contingencies.
Have your legal adviser look over your commonly used contracts. There are also many small legal firms that specialize in providing industry-specific contracts at a reasonable cost.
5. Make Sure the Business Is Compliant
Depending on your business, you may need to meet the requirements for a variety of regulations. For example, a small businessman working in a sole proprietorship as a handyman may want to expand his business by taking on construction work with a broader scope than ever before. He may need to file for construction permits for his services. He may also have to file a lien for the work if the client fails to pay.
In order to make sure his work is legally compliant with code, and to ensure he has recourse if not paid, obtaining legal advice before expanding his services can prevent the loss of his time and money.
In this case, his attorney could provide appropriate legal advice for small businesses involved in construction. This would mean advising him on how to obtain a construction license. He may walk him through the process for filing permits.
The lawyer could also help set a system for filing liens against the homeowners who fail to pay for the work. By speaking with an attorney ahead of time, this small business owner avoided making costly mistakes before taking the next big step in his company’s growth.
6. Honoring Employment Laws
Navigating the intricacies of employment law has become increasingly complicated in the 21st century. If a small business owner wants to hire extra help, they need to be aware of laws that regulate the labor market. For example, each state has different laws governing the hiring of minors and the hours they can work at different times of the year.
Even a small business, like the handyman above, needs to follow these laws when he hires part-time help from local high school students. There are also laws governing work hours and benefits. And there are undoubtedly strict laws about hiring discrimination.
A small business owner without current knowledge of human resource practices and employment law needs to seek legal advice for small businesses before hiring their first employee.
Your attorney can help you remain within the law when hiring employees to expand your business. This way, there will be no question about whether or not your hiring practices are compliant.
Finding Legal Advice for Small Businesses
Finding a lawyer to walk you through the process of starting your business may feel unnecessary. However, if your business plan is solid, it deserves legal protection as much as it deserves your time and dedication. Getting legal advice isn’t necessarily expensive, either.
And it may certainly be less costly than the penalties incurred for making mistakes.
Getting legal advice to set up your small business structure and ensure you’re properly licensed and registered is the smart move. And it’s well worth the cost. When you know your new venture is free and clear of any potential legal issues, you can focus on making your passion a reality.
If you run a small business and have run into a situation when you needed to seek legal advice, please share your experiences with us.
This way, we can help our readers remain vigilant about potential obstacles to growing their small business successfully.