HomeNewsFive ways your business can end up on the wrong side of the law
Five ways your business can end up on the wrong side of the law

Five ways your business can end up on the wrong side of the law

Last updated 12th Apr 2022

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By definition, entrepreneurs are experts in their field – passionate people with a mission in life and a million things to make happen at any given time. Starting your own business is very much a baptism of fire when it comes to multi-tasking, as you need to accomplish everything from writing a marketing strategy to winning clients and hiring the right people, as well as managing day-to-day administration.

Within this context, it’s perhaps little wonder that the legal considerations of establishing your own company are often overlooked, and yet mistakes made here have the potential to devastate a promising business in an instant. Avoid these common pitfalls and you have a far greater chance of being able to grow your startup successfully. Here are five of the most common errors, and how to avoid them…

Rejecting Proper Legal Counsel

In the early days of a business, there are often many competing costs and little spare capital, so avoiding the extra expense of hiring a good small business lawyer can seem attractive. But don’t get the proper support and you could be asking for huge legal troubles ahead. Many entrepreneurs will assume that if they haven’t set up as a corporation, they don’t have the same duties and obligations in law to their customers, but this couldn’t be further from the truth. Legal issues can arise at any time, and especially in the early days, have the power to derail a promising enterprise. Finding the right legal support from the get-go is critical.

Adopting The Wrong Business Structure

The way your company is set up as an entity in law can have a massive and far-reaching impact. Misunderstanding what is an LLC (limited liability corporation) is a mistake many entrepreneurs make – as each form has its own set of benefits and drawbacks. As a sole trader, you and your business are inseparable in legal terms, meaning you are personally responsible for any debt or court judgements incurred by the business. That means, should you get sued, your personal assets are directly at risk. Although setting up a corporation entails a certain amount of expense and some extra paperwork, it brings benefits in the form of certain tax breaks and being able to separate business accounts and dealings.

Not Putting Terms and Conditions In Place

Even the most low-level, online-only outfit needs to have robust user terms and conditions included prominently on its website. These stand as a legal agreement between your business and the customers you deal with and specify limits to the use of your products and services that the customer is agreeing to abide by when dealing with you. If you don’t have these, with a checkbox to indicate that the customer has read and accepted your terms, then you are wide open to being part of a lawsuit, so make sure you are covered.

Not Making Employee Background Checks

The single most vulnerable and potentially expensive area for the business comes when you start to employ others. Staff who will be interacting with customers and who are responsible for delivering results can cause a whole heap of headaches if things start to go wrong, and you won’t have a leg to stand in if you have failed to make proper checks at the recruitment stage. There are additional legal requirements on the documents you need to retain on file about your employees, and failure to secure them can lead to your business being compulsorily shut down or even jail time. If you aren’t experienced in recruiting skilled staff, then using a professional recruitment agency is one way to ensure these bases are covered.

Not Protecting Your Intellectual Property

Your business idea will have some unique aspects, and these are ultimately what connects with your customers and allows you to succeed. So not protecting these assets fully is madness, and yet precisely because of their intangible nature, they can be easy to overlook. If another company decides to use your ideas, name, brand attributes or creative output, you won’t get any legal recompense unless you have protected these things legally using patents and other forms of IP laws. There are differences in the law around physical products and ideas, and different cover will be needed for both, especially in high-risk sectors using a lot of . Make sure you understand what cover you need and have it in place, or the consequences could be unimaginably severe.

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