When you’re running a small and fast-growing business, it can be easy to get caught up in all the exciting developments, and let some of the more tedious, but equally important things slide. Legal mistakes are some of the most damaging blunders that any business owner can make, so obviously, you’ll want to avoid these wherever possible. Ignorance of the law excuses no one, so here are four of the most common legal mistakes you need to make sure you’re steering clear of…
Failing to Register your Business
If you sell goods to customers, your operation earns more than $12,000, and you’re based in the state of Washington, then you’re legally obligated to register your business. Bear in mind that this is only in the state of Washington, and the law varies from place to place. You’ll need to visit your Secretary of State website to make sure of the requirements, but by and large, most businesses are required to register with the state they’re based in. If you don’t know where to begin, the Small Business Administration has a handy guide that will clear up the issue.
Failing to Understand your Employer Responsibilities
Excluding sole traders, all business owners have certain obligations that they need to fulfill to their employees. You’re probably already aware of things like providing minimum wage, and having contracts outlining employees’ right to severance and redundancy pay. You’ll also need an employee handbook outlining policies on sickness and maternity leave, paid holiday, and workplace harassment. Past that, one aspect of employer responsibilities you simply can’t afford to let slip through the net is health and safety. Depending on the niche you’re occupying, this can mean anything from making sure that a small office is cleaned regularly, to supplying workers with a full roof fall protection system. Simple online research will give you a fundamental idea of what you need to do as an employer. However, the best way to make sure your business is in-line with all of its health and safety requirements is sitting down with a lawyer and talking through all the details of the work your employees carry out. Full compliance with health and safety regulations can mean quite the investment, but it’s worth it to avoid having your company shut down!
Mixing Up Contractors with Employees
If you think you’ve made this error, then don’t beat yourself up about it! Even seasoned business owners have been known to mix up this distinction, and bring the law down on their heads as a result. Understandably, you might be tempted to stick to hiring contractors, simply to avoid the costs that can come with employees. Social security, unemployment, along with training and equipment, all make permanent employees much more expensive to take on than contractors and freelancers. Unfortunately, the IRS doesn’t allow you to decide whether or not the person in question is an employee or a contractor. Your control over the hours they work, the amount and the way they’re paid, and the nature of your relationship with the person, are all deciding factors on whether or not one of your workers can be legally considered a contractor or employee.
Relying on Online Contract Templates
This isn’t inherently a bad move, provided that you’re being careful about it. A lot of small business owners go looking for contract templates online when they’re first starting out, and for an agreement without much consequence, this can be totally fine. However, with anything more high-risk, you need to exercise more caution. A process like giving one of your employees an advance on their monthly salary may not require the help of an attorney. However, in the large majority of cases, buying a cheap, generic contract online is a risky idea. Our modern access to the internet has made a lot of us feel like experts having read a couple of blog posts, but we’re not. Contracts between you and your workers are mainly there to formalize an agreement, but should also seal up any kind of loophole that could be exploited in the event of a disagreement. Remember, courts have overturned countless contracts over the years, simply over the meaning of a single word. When it comes to drafting contracts, you certainly get what you pay for. Don’t get looped into a long, stressful, and expensive legal battle over one little mistake in your contracts!
As your business races ahead, be diligent, and make 110% sure you’re not making any of these legal blunders!