When a new entrepreneur has an excellent business idea, it might be tempting to hit the ground running without taking the time to understand the legalities involved in running a business. Failing to understand these legalities can lead to gridlocks, lost savings and lawsuits.
For this reason, business owners will want to learn as much about business law as possible. Specific areas that must be understood include:Â
â€¢ Contract rules
â€¢ Personal liability
â€¢ Employee regulations
â€¢ Patent laws
â€¢ Regulations specific to an industry
Some businesses overcome this challenge by relying on a lawyer. Doing so may cost money, but it also saves the business owner the time that it would take to learn the basics of business law. In the case of dividing up business assets and even complicated domestic situations, many people also save time and money by hiring estate planning lawyers. If you take this route ask the lawyer to provide an ongoing education on legal matters so that you can perform many tasks yourself.
Get Agreements in Writing
Many businesses do not take into consideration the importance of paperwork and may overlook certain crucial details such as the agreement between business partners. Where patents and intellectual property are concerned, the failure to maintain a legally binding agreement detailing who is responsible for what and who has ownership for what will lead to potential litigation down the road. The best time to form an agreement is before the business partners have a falling out.
It is crucial that businesses document whom will do what, how much each individual is expected to contribute, what happens if someone leaves, what happens if the business needs more capital and how much capital each individual is expected to contribute.Â
Create Contracts for Employees and Clients
For reputable businesses, contracts are the best tools for protecting the business from litigation. The contract can be referenced during a legal dispute to verify that the company fulfilled the stipulations of the contract. For the employee contract, the business must be careful when determining whether the employee is an actual employee or an independent contractor. There are both federal and state laws that dictate whether an individual is an employee or an independent contractor.
Another common mistake that business owners make is to not have an executive. Gridlocks are often the death of a business and the fastest way to have a gridlock is for no one to have executive privileges. There must be an executive manager who is capable of making the most difficult decisions.