As a business owner, you hope you’ll never see the day when you have to “lawyer up” for one reason or another.
But, here’s a sobering statistic: Around 60% of small businesses faced a significant legal event over the past two years. That number indicates that for 1 in 2 business owners, it’s not a matter of if, but when you’ll need to call a lawyer.
So, what are some of the most common legal issues for businesses? And, how can you avoid facing a legal problem?
Look no further than this guide. We’ll walk you through some of the most common legal issues your business may face and the things you can do to avoid them.
Company culture is one of the most important things to consider when starting a business. You should cultivate an environment of honesty and transparency, where all employees feel comfortable and are treated fairly.
If you don’t, you could quickly find yourself facing a discrimination case.
A discrimination suit can be filed by current, former, or even prospective employees. Their grounds for suing can be based on a number of factors, including:
- Sexual orientation
- And more
There are two types of discrimination that your company can be accused of practicing.
Indirect discrimination is the act of applying a discriminatory practice to a specific group of employees. Direct discrimination, on the other hand, is when one particular person is treated less favorably due to one of the factors listed above.
Depending on the state in which your business operates, there are certain licensing requirements that must be met when starting a business. And, often these licenses must be renewed annually.
You need to make sure you’re in compliance with your local government’s licensing regulations, or you could face costly fines.
You can check with local licensing officials to see if you’re in compliance. Or, consider looking at business lawyers in specific locations close to where your business operates, as they’ll know the licensing requirements you need to meet.
- Business Structure
When you first start your business, you have options about how to register your company. These structures include:
- Limited Liability Company (LLC)
- Sole proprietorship
- S Corporation
- C Corporation
The type of structure you choose determines the taxes your business is responsible for paying. And, it also determines whether you’re held responsible as an individual if your company has a lawsuit filed against it.
Make sure you know the ins and outs of the different types of business structures when starting your business. And, once your business is up and running, make sure you’re following the regulations based on the structure you chose.
Anytime you develop a new product, it’s an exciting time for your company. However, not doing the proper research beforehand can lead to a world of legal troubles, if you’re not careful.
You’ll need to make sure your team carefully researches existing patents, copyrights, and trademarks.
A failure to do so can lead to legal issues if you try to use a name or product that is already owned by another company.
Additionally, don’t forget to file copyrights and trademarks of your own, so you don’t run into an issue later on, where your company needs to pursue legal action against another company if they try to use your name or product idea.
- Wrongful Terminations
Having to fire an employee is arguably one of the worst parts of being a business owner. This is especially true at small companies that often feel like a “family environment.”
When you do have to go through the unfortunate process of letting someone go, you must make sure you do so legally.
While most states are “at-will” states, meaning you can let go of an employee at any time for any reason, this doesn’t mean you can fire them for an illegal reason.
If you fire an employee for any of the following reasons, you could be facing a wrongful termination lawsuit as a result.
- Violation of public policy
- Violation of express or implied contracts
- Violation of discrimination laws
- Violation of labor law
When you do have to fire an employee, make sure you do so with a termination contract that’s written and reviewed by an attorney to cover all of your bases.
- Employee Misclassification
There are several different types of employees that can help your company be successful. However, you must make sure you classify all your employees correctly, or you could be facing legal concerns.
Full-Time vs Part-Time Employees
You classify full-time employees based on the number of hours they work each week. They are often required to receive more benefits than part-time employees. Many times, full-time employees are also paid a salary, while part-timers are hourly workers.
Independent contractors, on the other hand, are hired as needed, on a contract basis. They aren’t entitled to as many employee benefits and they aren’t classified as direct employees.
- Customer Lawsuits
As a business owner, your primary goal is most likely to leave your customers happy and satisfied.
Unfortunately, despite your best efforts that won’t always be the case. If you’re dealing with extremely dissatisfied customers, you might be facing a lawsuit as a result.
And, if you have a group of unsatisfied customers, then you could be hit with an even bigger class-action lawsuit.
Anytime you have a customer threatening to sue your company, you should seek out representation from a lawyer who specializes in legal issues for small business owners. Doing so could save you time and money.
Feel More Equipped to Handle Legal Issues for Businesses
Now that you know more about the most common legal issues for businesses, you can feel better prepared about how to avoid them. And, if your legal issues are out of your control, you know what you need to do to get through them.
For other helpful business tips like this, check out our other articles.