The business world is overly complicated and not for the faint-hearted. From battling competitors, producing quality products/services, marketing your enterprise to keeping up with the market trends, and sorting several legal issues, small businesses should overcome many hurdles to succeed. Complicated as they are, legal issues are part of running a business, and entrepreneurs should learn how to prevent and deal with these issues throughout their journey.
Below are the common legal issues that can sink your small businesses.
1. Employment Laws
Even if you start your business solely, you will have to hire employees sooner or later as your business grows. When such occurs, ensure that you handle your employees according to the tenets of employment law. Some labor laws that can easily be violated include;
- Employee Classification
Defining the status of your new employees is important before establishing any legally binding contracts. Employees can be categorized as either part-time, full-time, or independent contractors. Classification affects several clauses of employment contracts, including job description, minimum wages, and entitlements.
For instance, full-time employees differ from part-time in the number of hours worked. Full-time employees can work between 35 and 40 hours and enjoy hourly payments and other benefits. On the other hand, part-time employees are paid hourly but aren’t entitled to other benefits other than what’s included in their employment contracts.
- Termination of Employment
Terminating employment contracts is among the main causes of legal issues for small businesses. Even if the employee was underperforming, terminated due to gross misconduct or redundancy, employers should handle the situation carefully. Regardless of the cause of termination, you should provide a notice of termination within the required period.
Instant dismissal is only applicable if the employee is engaged in theft, assault, fraud, or refused to comply with his/her job description. To avoid unlawful dismissal, consult employment lawyers who can help in drafting comprehensive terms of employment.
Employees can also sue your business on the grounds of discrimination. Common forms of workplace discrimination include age, gender, ethnicity, race, national origin, and harassment. Employers should provide a healthy work environment that appreciates diversity.
2. Customer Protection Laws
Customer relationships are an important factor in the success of your business. Unfortunately, they are the most delicate and fraught with several challenges. This is why several laws have been enacted to regulate customer-business relationships. In most cases, the laws favor your customers from being exposed to abusive business practices.
Most customer protection laws revolve around privacy rights, misrepresentation, unfair business practices, and product liability. Like other legal aspects, violation of customer protection laws can subject your business to serious consequences, including large fines and suspension of your operating license.
Licensing is the most basic requirement, yet most businesses choose to ignore it. Before starting your business operations, ensure that you comply with licensing provisions of local authorities and the federal government. The cost of acquiring a license varies depending on the nature of your business and location. If you aren’t sure about the licenses required for your business to operate, consult your lawyer or local authority licensing agency.
4. Intellectual Property Laws
In the current digital age, where most businesses are shifting to the digital space, the risks of violating intellectual property laws are on the rise. Intellectual property laws govern intellectual or intangible creations from other people, such as literature, designs, images, music, and symbols.
Businesses can easily violate these laws by using copyrighted content, such as images and logos, on their websites. Risks of violating these laws increase if you outsource the responsibility of maintaining your digital profile to third-party agents.
5. Choosing the Wrong Business Structure
You should establish the right business structure to avoid tax and legal issues. Unfortunately, with the plethora of business structures available, choosing the right one might seem challenging for most first-time entrepreneurs. Understanding every business structure in-depth and consulting an attorney can help small businesses choose the right structure.
6. Immigration Issues
In the current mobile world, your business may soon get applications from job seekers from various parts of the world. Before hiring anyone outside your jurisdiction, ensure that you familiarize yourself with employment laws guiding the hiring of non-citizens and non-permanent citizens. The government routinely conducts unannounced immigration audits on random businesses.
Similarly, if you want to outsource some of your business operations to another country, consult employment lawyers for guidance on employment contracts and other policies in the foreign jurisdiction. Violations of these laws have stiff penalties that can sink your business.
The current business world is undoubtedly fast-paced and hectic. As such, even the smallest issues can lead to serious legal cases if not handled properly. Anticipating these issues by preventing possible exposures and seeking legal advice is recommended to avoid unnecessary lawsuits that can drown your company.