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Most business owners don’t have the time, energy or money to deal with legal problems which can be avoided.
While many small business owners think contacting an attorney is akin to opening a faucet, where money gushes out with little coming back in return, this analogy is horribly inaccurate.
Legal advice and guidance is absolutely essential to any small business. Yes, you will get a bill, but using an attorney doesn’t have to be a burdensome financial drain. Contrary to popular belief, for business owners, a visit to an attorney doesn’t mean that you’re in some sort of trouble.
It means you are being proactive in protecting your livelihood.
Here are some tips to help you stay out of legal trouble and avoid problems before they occur.
STARTING A BUSINESS
Far too many people start a business and get their operations up and running before ever contacting an attorney for legal guidance.
Before the first dime of income shows up in your account, you should find a legal advisor to help you review the proper business structure, legal ramifications and other matters designed to protect your assets. For example, if you do business as a sole proprietor, all of the personal assets of you and your registered domestic partner may be at risk.
Use of a corporate structure may be a better structure to protect both of you. A business attorney can help you determine what is best for your individual situation.
CHECK YOUR CONTRACTS
First, get it in writing! I can’t stress enough how important it is to get everything in writing.
It’s rarely a good idea to do business with a smile and a handshake these days. Oral agreements are very difficult to prove or enforce. A contract needs to be written in order to be enforceable. It can be as simple as a letter of agreement documenting what the parties have agreed to, and each person signs it and dates it. That’s it!
This is the simplest way to protect yourself. The more detailed the contract the better it is. Written contracts need to be specific and detailed so there is no misunderstanding about the meaning of the words. Memories fade. There can be no misunderstanding about what each party was supposed to do, if there is a detailed contract stating what each party will do, when they will do it, how and when you’ll be paid, and the like.
If you can’t get a formal signed contract, send the other party a letter confirming your agreement, and ask them to sign the letter and send it back to you, acknowledging the agreement. This may provide good evidence if you should need it later. Even if they don’t return the letter, but they have not written back stating that your letter is incorrect, that will still provide good evidence.
If you are given a contract to sign, don’t sign it until you have read it and understand it. If it’s very complicated, such as loan documents, commercial leases, construction contracts, or real estate contracts, consult a professional who can review it and explain its legal meaning to you.
When you sign a contract, you are agreeing to abide by its terms and conditions. The law assumes you understand what you are signing.
Never sign anything you don’t understand until it’s been explained to you. This is one of the most common ways that business owners get into trouble.
One way to economize in your business is to have standard contracts written for the most common types of transactions. You don’t want to have to reinvent the wheel all the time, but it’s important to have standard contracts to protect your business, with the appropriate disclaimers for your particular business.
Whenever you hire workers to help in your business, you need to be very careful about following the rules in determining whether they are employees or independent contractors.
This will affect payroll taxes, whether workers compensation insurance is required, and a host of other items. You can get into very costly legal trouble by misclassifying workers as independent contractors when they should, in fact, be classified as employees.
You always need a written contract for independent contractors. Consult a professional if you are not sure what to do. In a future article, we will address this issue in more detail.
GET PROFESSIONAL ADVICE
Finally, don’t be afraid to consult professionals for advice. It’s hard for a business owner to be an expert in everything.
A small amount of money spent to keep you out of legal trouble is money well spent. Establish relationships with an attorney, an accountant, a financial advisor, insurance agent, and any other professional who can provide advice and counsel that will keep your business running smoothly and help you avoid legal and financial problems.
Kathie Browne, an attorney with 25 years experience, specializes in business law, real estate and estate planning. She works frequently with the LGBT community and serves on the Board of Directors of Desert AIDS Project. She can be reached at her office in Rancho Mirage at 760.837.9292, kathiebrowne.com or by email at email@example.com