7 Potential Legal Issues for Your Business and How to Avoid Them
Of all the different types of issues that a business might face, perhaps none can be as devastating as legal ones. This is perhaps because of how they can take a business by surprise and severely hurt its bottom line. As a business owner, protecting your business from litigation should be at the top of your priority list, even though research tells us that as much as 90% of all businesses are engaged in litigation at any given point in time.
The following is a list of seven potential legal issues every business owner could be faced with and how to handle them.
1. Intellectual Property:
Trademarks, Copyrights, and Patents
Intellectual properties like trademarks, copyrights, and patents are all essential elements of running a business and in some cases, can play a significant role in making or breaking that business if not handled properly. From being sued for infringing on a copyright or trademark, to earning vast sums of money from a held patent, there are numerous business and legal ramifications that a business could be faced with from improperly handling any of these elements.
More often than not, a business owner will unlikely be able to handle such matters on their own and will need the expert advice and guidance of a business attorney who also handles trademark issues.
Taxes are unavoidable and every registered company has to pay them. To ensure compliance with all relevant tax laws that are applicable to your business, a business owner must have a thorough knowledge of which business taxes to pay, when to pay them, how to calculate the tax rate and amount, and more.
While some people often decide to avoid or evade paying their taxes, such actions can have dire consequences if it runs afoul of the law. Given that many people often find paying their tax burdensome, it behooves them to rather find what legal and legitimate options are available to them to reduce their tax obligation (tax avoidance,) rather than going the more illegal route of tax evasion. This without a doubt is something that an experienced tax attorney can help with.
It should be noted that anyone dealing with tax matters should always consult with an accountant. For one, they have the know-how and experience when it comes to helping you save as much money on the taxes that you may otherwise owe the IRS. For instance, they will be able to advise that a simple thing like creating an LLC instead of a Corporation for your business means that you will not be subject to double taxation that Corporations are subjected to.
3. Discrimination/Harassment Cases
Discrimination or harassment can be a serious problem in an integrated workplace with workers from various ethnic and religious backgrounds, as well as social classes. A company’s ability to handle such complex human interactions can play a key role in limiting the potential damage that can be done if cases of discrimination or harassment are ever brought against it.
It is exactly for this reason that the company must be well equipped to handle co-worker disputes when they arise. Holding regular meetings and feedback sessions with staff will allow for the “policing” of these transgressions and ensure that it does not occur in the office, or that it is nipped in the bud as soon as it does.
4. Signing a Commercial Lease
While a growing number of people are starting to run their businesses from their homes, therefore not needing to lease an office space, the fact remains that the vast majority of businesses still operate from leased commercial space. Thought must therefore be given to the needs of the business in terms of office space, amenities, infrastructure and layout of the building, and much more, to make sure it satisfies the operational needs and regulatory requirements of the business.
Signing a lease puts a business owner into a fixed arrangement with the building owner for a specified time period, often involving a substantial amount of money. It is, therefore, preferable to seek professional help in reviewing both the facility you are considering leasing, and the attached lease. Doing so will ensure that there are no unfavorable terms hidden in the contract while making sure that the property meets all legal and/or regulatory requirements before you sign.
5. Employment Agreement with Non-Competes
A non-compete agreement is a written legal contract between
various parties (oftentimes an employer and employee) specifying that the
one-party will not enter into or start a business similar to that of the other
party. The non-compete agreement lays out binding terms and conditions about
the employee’s ability to work in the same industry and/or with competing
organizations upon employment termination from the current employer.
Employers benefit from non-compete agreements because they keep a former employee from sharing company knowledge, trade secrets, client lists, potential clients, strategic plans, and other information that is confidential and proprietary to the employer with competitors.
Employees on the other hand benefit from non-compete agreements because they receive something of value in return for signing the non-compete. In most cases, the item of value is the job offer. A promotion or raise in return for the signature also qualifies as something of value.
However, it is not impossible that some terms in a
non-compete might be unfair, or perhaps even outright unlawful, therefore a
potential employee must be sure that he or she is not being put in an unfair
situation by signing such a contract.
6. Non-disclosure Agreements
A business owner will often need to use one of two types of Non-disclosure agreements (NDA)- a mutual or general NDA. The general non-disclosure agreement will usually stipulate that only one side can share confidential information with the other side. On the other hand, a mutual non-disclosure agreement states that each side may share confidential information with each other.
An improperly drafted NDA that leaves a lot of scope for (mis)interpretation, which could then lead to litigation, is perhaps one of the main reasons to use professional legal help in getting such document drafted, to ensure that it adequately serves the purpose for which it is needed, as well as protecting the interests of all parties involved.
7. Vendor Contracts
Subcontractors and vendors help businesses boost productivity, and oftentimes at a more cost-effective rate than full-time employees. Sometimes, they are simply unavoidable. Some of the things that a vendor or a subcontractor agreement will outline include:
- The scope of a project
- Payment terms
- Terms and conditions.
A properly written contract agreement can help reduce the risk of dispute because it defines the relationship and sets clear expectations that both parties can consult as the job progresses. And even when a dispute does arise, such a contract will provide the basis upon which mediation or litigation will be based, barring any other external considerations. This is exactly why each party to a contract must read and properly understand all the terms of a contract, including any fine print, before signing it. Otherwise, consult with a contract lawyer for assistance.