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Legal mistakes that new companies make

Starting entrepreneurs tend to focus most of their attention on marketing their products, services, growing their reputation and spreading their brand. In the heat of competition, it is easy to overlook the legal considerations of an operating business. This legal oversight may be what brings your business down. Here are some legal mistakes that starting companies make.

Not hiring an attorney

It’s common for small businesses and partnerships to believe they don’t have the same level of legal obligations as bigger enterprises do. It is a mistake to believe that the legal issues will only appear once you grow in scale. A good idea is to always get a lawyer before you launch and let him/her set you up correctly from the onset.

Not setting up the right business structure

Many legal problems could arise when you fail to identify the correct business structure of your company. There are differences between a sole proprietorship, partnership, and corporations. You should choose the right structure after studying the benefits and disadvantages of each, then you can determine the right one for you. If you set yourself as a sole proprietor, for example, you are legally considered “one “ with your business. If your business happens to be sued, your personal assets are also at risk.

Not having terms and conditions policies to which customers agree to be bound

 It is a good practice to have a “Terms and Conditions” agreement for customers to check when employing your services online. This policy should be in writing and published form, otherwise you are left in the open during possible legal suits by an eventual costumer in case of a problem.

Not having a legally-binding privacy policy

Every business should have a privacy policy that explains information about customers it does and does not share. You must notify your customers, for example, if you plan to share their emails with another company. This privacy policy must be made public.

Failure to follow business tax laws

You need to know what taxes you are subject to and when the income tax returns should be filed. The tax laws are complicated no matter where the business is located. A good idea is to include a business accountant or have an accounting software that keeps your records and files your taxes.

Inappropriate or incomplete contracts with outside vendors

When entering into an agreement with another company or service, be sure to have legally-binding agreements. For example, when purchasing raw materials from someone outside your business, you need complete contracts. The form of these contracts should be drafted by your attorney instead of free internet websites.

Not getting copyrights, patents, and trademarks

Without protecting your products and your intellectual property, you risk having others steal your name. The laws are different depending on the products, codes, and ideas. You need to know which protection to use depending on your company.

Not getting nondisclosure and non-compete agreements

 Everyone who works for you should be bound by a legally-binding nondisclosure agreement to protect your proprietary information. Depending on your company, set up nondisclosure agreements that legally binds your employees never to reveal your secret information. This may extend to client lists and customers, in case of creating a completing business.

Legal Tips for Small Businesses

From the onset, your business strategy should satisfy the legal requirements of your industry. It’s important that you always operate within the legal bounds of your particular industry or business. Giving the necessary time, attention an effort to the legal side can save you many hurdles down the road. Here are some tips to help you make the best out of your legal strategy:

You’ll need more than you expect

It is always easier to underestimate the various legal expenses. However, these legal fees have the tendency to add up and turn into a large unexpected upfront investment. You should take enough time and have enough buffer in your budget for any unexpected additional fees. A consultation with your attorney is recommended to work out an estimate of the legal fees from the start.

In addition to the legal fees, there are also license fees, bonds, license filling fees. It is a good idea to speak with other entrepreneurs to determine an estimate of these various costs. If you are not careful with your budgeting, you might end up dipping into funds best spent for other business objectives. As a rule of thumb, assume you’ll need twice as much as you previously anticipated.

Make sure you have the right attorney for each task. 

The attorney you work with should be specialized in the given field. To obtain patents, for example, work with a patent attorney. The in-depth knowledge of an attorney well-versed in the specific field will serve you well and save you time and money. You’ll spend more in the long run if you opt for a general practice lawyer, whose expertise is not directed to the field in question.

Make sure you are covered and not breaking the law. 

Not having your legal aspect in order will not only cost you financially, with all the eventual fines you’ll find yourself forced to pay, it will also cost you your reputation with customers. Keeping up with the competition should not lead you to overlook the legal aspect and risk squandering an damaging your image with customers. It’s important to work with trusted legal advisors to make sure you are always operating within legal bounds.

Run legal processes in parallel; don’t wait. 

You don’t have to wait for a legal process to be complete to start another. You can build areas of your business where legal clearance is not required, while you wait for the other areas to get the necessary clearance. If a state holds you back with a given regulation, you can launch your business in another state while waiting for the previous regulations to be cleared. It’s like a continuous switch and resume, making you use your time wisely and effectively. These steps will help you grow as quickly and as wisely as possible.

It’s important to remember, however, that just because a thing is legal it doesn’t mean it’s always right. You need to focus on the values of your business. These values and intents should be your primary drives, while still operating within legal bounds.

Types of Insurance You Need to Protect Your Business

From the start of a business, there are some risks that you are exposed to. Having the right insurance in place is important, even before hiring your first employee. Sometimes a single event or a lawsuit could be enough to end a small business before it had the chance to stand on firm grounds. Luckily, a wide range of insurance types is available to protect small business against these dangers. We have compiled a list of insurance types that a business should have in place as soon as possible.

Professional liability insurance.

Professional liability insurance, also known as error and emissions (E&O) insurance, covers your business against negligence claims due to harm resulting from mistakes or failure to perform. Each industry has its own concerns, there is no one-size-fits-all policy that covers all professional liability insurance.

Property insurance.

This insurance covers the equipment, inventory and furniture in event of fire, storm or theft. It must be noted that mass-destruction events such earthquakes and floods are usually not covered by a standard property insurance. You must inquire and check with your insurer for a separate pricing and policy, in case you live in area where these issues are common.

Workers’ compensation insurance.

 When you hire your first employee, workers’ compensation insurance must be added to your business’s insurance policy. This insurance covers accidents that results from working with your business. It includes medical treatment, disability and death benefits in case an employee is injured or dies. Some pricey claims could result even in a low-risk work, such as slip-and-fall injuries or tunnel syndrome.

Home-based businesses.

 Many professional businesses start as small home businessess at home. If your business is done out of your home, the common homeowner’s policies generally don’t cover home-based businesses in the same way property insurance does. Be sure to ask your insurer to cover the equipment and inventory of your home-based business using an additional insurance.

Product liability insurance.

Product liability insurance is requires in case your business manufactures products for sale on the general market. You can find yourself named in a lawsuit concerning damages caused by one of your products, even if you take all the required safety procedures. You need to protect yourself against such cases with product liability insurance that can be tailored according to your specific product type.

Vehicle insurance.

The vehicles that your company may use must be fully insured to protect your business against any liability in case of an accident. You should insure against any third-party injuries caused by your vehicles. You employee’s personal insurance will cover them if they are using their own vehicles for business, with the exceptions of goods and services delivered for a free.

Business interruption insurance.

A business’s operations will most likely be interrupted in case of a disaster or catastrophic event. You will suffer from the loss of income due to the inability of the staff to manufacture your product, and perform the necessary marketing and selling. This is usually the case for companies that require a physical location to operate.

Having the right insurance can save you major financial loss due to catastrophic events or lawsuits.