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Owning a business can be an all-consuming yet rewarding adventure. Business owners typically work long hours and juggle multiple responsibilities to make their businesses successful. In doing so, however, many ignore the myriad legal issues confronting their businesses - at their own peril.
Savvy business owners understand it invariably costs less money and time to proactively avoid a problem than it does to reactively fix one. This article provides business owners general guidance on how to avoid some of the major pitfalls facing their business.
One of the most common problems we encounter is business owners that have failed to surround themselves with experienced business professionals such as those in B2B Connexions. As a business owner, you need this team of people to guide you through the intricacies of owning a business. Perhaps best of all, this will free you up to do what you enjoy and what makes you money – running your business!
Every business owner needs to understand the advantages and disadvantages of incorporating to shield personal assets from liability associated with the business. A business attorney will explain the various types of entities available (corporations, limited liability companies, etc.) and the importance of observing the “corporate formalities” after incorporation.
If you have a partner, your business agreement needs to be in writing. Meet with your lawyer and address such key questions as:
Many other types of agreements are required to be in writing: a contract for the sale of goods over $500; contracts over one-year in term; and leases with a term of over one-year are common examples. And even with those contracts that are not required to be in writing, savvy business owners know that writing out a contract clarifies obligations and roles between the parties and always leads to important questions that must be answered for the relationship to work effectively.
Unlike residential leases, commercial leases can strongly favor the landlord. Many commercial leases require the tenant to maintain and even replace the heating and air conditioning unit in their space. This can be a very expensive proposition that could cripple a business that isn’t prepared.
Even more importantly, many commercial landlords require your house and other personal assets as collateral to guarantee that you will pay the rent. This “personal guaranty” is effective even if you have incorporated your business in order to avoid personal liability. For these reasons, it is critically important that you obtain the advice of a qualified attorney to ensure that you fully understand each and every term of the lease.
Many business owners try to draft their own contracts. What results in many cases are contracts that are signed personally (as opposed to being signed by the entity) when they do not have to be, ambiguous terms, an absence of alternative dispute resolution procedures, and almost always, a lack of adequate remedy in the event of breach. The last point is important: if a contract does not state in clear terms that a breaching party will be responsible for the legal fees and collection costs incurred by the non-breaching party, the court will not award those costs. This fact alone often causes business owners to write off funds that are due to them simply because it will cost too much to pursue. Contracts do not need to be thirty pages in length; they can be as short as one page and still protect you and your business. If it’s important for your business, it’s important enough to be done right.
Make sure you understand your responsibilities before you act in areas such as zoning, licensing, intellectual property, trademarks, employment, consumer protection, environmental matters, product liability and advertising.
This is just a short list of the types of pitfalls that can easily be avoided with qualified professional assistance. Please call Marc at 508-587-6902 or contact him via e-mail at mclerc@clercpc.com to discuss your specific situation in detail or to schedule a free initial consultation.
This article is intended to provide a general overview of information that may benefit a business owner and his or her business. It is not intended be all-inclusive nor should it be construed as legal advice. Please call us to arrange a meeting with one of our attorneys to discuss any questions you may have regarding your specific business needs.
