Advice from The Company Lawyer: 4 Mistakes to Avoid
Is your head spinning trying to understand all the laws surrounding your business, large or small?
Mistakes that lead to legal pitfalls and lawsuits can cost small businesses big time. Did you know that many small business owners worry about being targeted by disgruntled customers, contractors, employees and others in an unfair lawsuit? Large companies have the same problem. Defending a lawsuit whether it is justified or not is a costly, time consuming endeavor that can turn your business from riches to rags in a very short time. Time wasted on dealing with discovery, documentation, subpoenas, depositions and long meetings with your company lawyer will detract directly from your bottom line, as well as your business reputation. Even if you “win” your business may ultimately lose! Whether you have in-house counsel or take on “Big Law” as your company lawyer, avoiding unnecessary conflict in your business can be the difference between profit and loss.
Here are 4 legal mistakes that you can avoid in your business, and seeking advice from your company lawyer and CPA could help you save time and money!
1. Not Following Business Tax Laws
Nothing is certain except for death and taxes!
Failing to pay attention to your business’s tax situation can put you in hot water with the IRS or your state tax authorities.
Is your business subject to sales tax, use tax, or payroll tax? If you don’t remit the money from these taxes to the proper agency, your business could get shut down.
Do you know when to file your business tax returns? Do you need to make quarterly estimated tax payments?
Tax law can be complicated so spend some time researching the answers or talk to your tax professional. If you do not have a CPA or other tax professional, your experienced company lawyer will be able to offer an introduction to appropriate representation. Your tax professionals and experienced company lawyer can work together to help guide your business in the right direction.
2. Not Setting Up Your Business Properly
Without the proper formation of your business and attention to the formalities of corporate governance and existence, you could leave yourself open to personal liability if you get sued.
There are several options for the legal structure of your business. Determine whether you want to conduct your business through a general or limited partnership, limited liability company (LLC),“C” corporation or work as a sole proprietor. Your company counsel and CPA can guide your decision-making.
Establishing your business through an appropriate legal entity can help when it comes to seeking investors, lines of credit, and more. And if you have already formed your business and were advised that another form of entity is preferred by potential investors, your company lawyer can help you take the steps to convert your company to the appropriate form of legal entity.
3. Failing to Have a Website Consent to Use or agreement to Terms and Conditions,
With the continued exponential growth in use of social media, how you interact with the public or your customers online is increasingly important.
A Terms and Conditions agreement is a written agreement often published on your website that specifies the conditions for the use of your website and the information contained therein.
This agreement and a Consent to conditions of use helps to protect your company in the case of a customer complaining about the results from accesing your website (did it catch a virus?) or potential reliance on information contained on your website.. A Consent to Use or login consent to Terms and Conditions. Even the largest and world-class business entities have fallen prey to hackers and compromised data and data breaches. You can bet that their company lawyers are kept busy in the defense and handling of the resulting business disruption. These breaches can put a company out of business and at a minimum damage business reputation.
These policies and agreements are especially important when collecting credit card and other personal identification information. Privacy plays a huge role in social media marketing. Collecting contact information for lead generation can also make or break your business but failure to properly protect this information can lead to the downfall of your business.
4. Improper Documentation from Employees
From W4 forms and I9s to 1099s and W2 forms, proper citizenship, tax status and documentation of employees and independent contractors is crucial for a growing business. If the tax status of theses parties is not properly handled your business could end up paying certain expenses twice (failure to withhold where required) or even subject you to business and personal fines and penalties for failure to comply.
Spend time researching the legal differences between an employee and an independent contractor. Make sure you have the proper documents from the people working for you. Always consult with your CPA or other tax advisors and company counsel when in doubt.
Do You Need a Top Company Lawyer?
Mistakes made in the formation, governance and documentation of your company and business enterprises might seem like overkill for entrepreneurs as business enterprises large and small, but companies that do not know what they don’t know face even more uncertainty.. Lack of sufficient cash flow is often the downfall of business. The few items covered above can directly impact your level of cash flow and consequently your prospects for success.
Procuring business legal advice from an experienced company lawyer can help you navigate these issues! And, the up front cost can save the back end loss.
Do you have questions not covered in this article? Need help handling the legal aspects of your business? Contact us for a personal consultation that’s unique to your needs!