Naturally, the legal issues you’ll face are highly dependent on your field of work; however, there are some litigious factors that seemingly crop up in every field:
- Selecting the wrong business structure or entity – For tax and legal purposes, it’s essential that you set up the proper business structure. Selecting the wrong one can have severe consequences, especially if you mark yourself as a sole proprietor, thus opening you up to personal liability. The entities you’d commonly select from include:
- Sole proprietorship
Each one of these has different tax structuring and dissimilar ways of legally viewing the owner and business; sometimes, as is the case for LLCs, they’re viewed as entirely separate entities. With the help of a small business attorney, you can select the optimal business structure. In addition, you can switch your structure to take advantage of the new tax plan.
- Employee hiring and firing – Far too many startups make the mistake of hiring employees or starting partnerships with the only thing binding them being a word of mouth agreement and a handshake. Simply put, this is foolhardy and one of the easiest ways to expose your business to lawsuits. While it may be smooth sailing initially, if problems crop up or the business relationship ends, it can devolve into serious litigation regarding company ownership, payments, or promises made.
Whether you are adding a partner or a new employee, it’s vital that you set out a contract from the get-go which stipulates everything from:
- Employee rights
- Contract date
- Possible reasons for termination
Further, if you do fire an underperforming employee, it’s essential that they sign an attorney-drafted termination contract so that they know the exact reasons for their firing. Simply letting them go without a termination form leaves you terribly exposed to hostile legal action.
- Licensing – Licensing is one of the common legal issues that many business owners know little to nothing about. As such, it’s essential that you are aligned with government restrictions for business licensing. Failure to do so could result in detrimental fees or could even cause your business practice to come to a forced halt. Costs and requirements of licensing will vary depending on your location, but it’s a universal requirement. Your small business lawyer can help you prepare accordingly, ensuring that your actions are above-board.
- Discrimination – These days, in this litigious business climate, lawsuits are surfacing on the grounds of alleged discrimination. Examples may include:
Unfortunately, many of these types of lawsuits are groundless; however, it’s still important for a business owner to prepare for any situation. To avoid this issue, your HR professional and your lawyer should work together to handle any problems that might arise.
- Harassment – The #MeToo movement revealed both the good and bad of highlighting harassment in the workplace. While there were many people who rightfully emerged to tell their story of harassment, there were also several grifters who attempted to take advantage of the movement by riding the wave of public sentiment. Many businesses were hurt in the wake of this crusade—some rightfully, others mistakenly.
To prevent this from happening in your workplace, hire high-quality workers and promote a work environment that detests hostile and discriminatory behavior. In addition, train your employees, staff, managers, or anyone else working with you to treat each other with respect and to report bad behavior immediately. By taking such actions, you can also protect yourself from baseless accusations.