As a lawyer for small business owners and online entrepreneurs, I have heard it all:
“I’m just a small shop. It doesn’t matter if I have that type of thing in place.”
“It’s going to cost me thousands to have a lawyer do all of this stuff. I’d rather put that into building the business.”
“I have known her for years and I trust her. We don’t need a contract.”
Does any of this sound familiar? If so, read on. Failing to take care of your business from a legal standpoint can result in even higher costs down the road. Whether you are just starting your business or you’ve been serving your customers for years, it is important to make sure that you are covering yourself legally.
3 Legal Tips for Small Business Owners
Protect Yourself Personally
If you are the sole proprietor of your business, you can be held personally liable for any business losses. What does that mean? If you get sued, you could be personally responsible for paying any judgments against your business. And that means a creditor could come after any assets that you own, including your house.
To protect your assets, form a limited liability company or an LLC. LLCs provide outstanding legal protection and allow you to protect your personal assets so long as you properly maintain them. To learn more, check with the Secretary of State office for the state where your business is based. If you aren’t comfortable filing the paperwork yourself, touch base with an attorney and they can help you with the paperwork and any questions that you may have.
Get It in Writing
I cannot say this enough: have contracts for every area of your business. Make sure you get everything in writing and that your contracts are specific. A contract should cover the rights of both parties, so there are no misunderstandings about what is expected. Even if you know and trust the party, put it in writing.
Your contract should include any important terms about the transaction. For example, if you are hiring an independent contractor, make sure you outline the contractor’s duties, payment schedules and confidentiality expectations. An attorney can draft agreements for you, or you can use DIY contracts that are available online.
Be Transparent with Your Audience
Depending upon the type of business you run, you may want to consult with an attorney, but you may be able to use DIY legal forms for this as well.
Just remember, handling the legal side of your business doesn’t have to be scary. Find a lawyer that you trust and get everything into place so that you know you are protected.