4 Jan 2019, 12:32 — 8 min read
Summary: It is a fact that most entrepreneurs have a basic understanding of the law, but many tend to overlook the legal implications of starting and running a business. GlobalLinker member and legal expert Ripple Nagpal shares 10 tips to safeguard your business interests in the new year.
As an entrepreneur, you shoulder the responsibility to make your business a success. Interaction with third parties like potential employees, marketing agencies, investors, contractors, competitors is an integral part of running a business. And with it the fear of client soliciting, idea imitation, employee poaching, cheating, lingers in the minds of business owners.
Here are 10 tips to avoid this stress and the legal measures that you can take to mitigate the risks involved in doing business this year.
1. Structure your business
Determine the proper entity structure for your business. Your choice of entity influences major future decisions that you might take, such as how you borrow money; how you will be taxed; how you will raise investments and; how you structure the sale of your business. Set up your business from the start as a separate legal entity like a private limited company, so that your personal assets are protected. Otherwise, you are personally liable for the debts and obligations your business incurs.
2. Maintain proper records
Ensure that the organisational documents are systematically kept in place. Your business is required to create and maintain proper records, including such items as adopting resolutions; documenting business decisions; paying payroll and taxes; maintaining the company’s bookkeeping; complying with labour and wage requirements and; acquiring and maintaining licenses or permits. Be sure to keep your business and personal finances separate.
Additionally, it is also advised to have an agreement that covers items such as management decision making, voting protocols, profit-sharing, restrictions on adding new owners and how the owners will solve disagreements. These items are typically included in an operating agreement, company agreement or shareholder agreement or co-founders’ agreement. Having a well-negotiated agreement can limit disputes and promote harmony among the owners/founders.
3. Employment contracts
It is critical for a business to hire good employees and have an enriching human resource pool. But that is only the first step. Businesses need to be aware that they must comply with various employment/labour laws and regulations.
Protect your business trade secrets, such as pricing, client lists, data, know-how, product specifications, business plans and marketing plans with agreements so employees and contractors cannot leave and start their own businesses, competing against you.
Generally, every company should limit their liability as much as possible before taking on any new employees. Typically, a company should have an employee handbook in place and ensure that all new employees sign an acknowledgement form stating that they received the handbook. The handbook should address everything from the company’s sexual harassment policy to the office dress code and leave policy.
4. Have written contracts in place
Often, business owners value speed over accuracy when it comes to detailing relationships with partners, vendors, customers and even employees. Verbal agreements are virtually impossible to enforce. Contracts must address each party’s obligations and explain how potential issues concerning your products or services will be resolved.
Be sure to document any modifications or extensions to your agreements in writing
5. Use Non-Disclosure Agreements
When exploring the possibility of working with other businesses or individuals, do not share your business’ confidential information, strategies, know-how trade secrets or proprietary information without first obtaining a non-disclosure agreement from the other party. It is a sine qua non (essential condition) for conducting successful business. It is important to make sure the non-disclosure agreement is very detailed and lays out exactly what proprietary information will be shared. Otherwise, you might risk losing valuable work to a competitor and cause major setbacks in making your business a success.
6. Avoid litigation
Litigation should be considered as a last resort. It is very expensive, time consuming and distracting. In many cases, the better solution is to negotiate disputed matters.
Litigation often results from poor planning, documentation and execution. Document all transactions with third parties and especially document any disputes. In many cases, litigation is the result of signing a bad contract or not fully understanding what you have signed.
7. Protect your business name
Several companies start using a name only to find out that another company has already been using that exact same name. A company should usually do a trademark search on the web to ensure that a business name is available. An attorney can help you register your name as well as a logo and assist you with protecting against anyone infringing on your intellectual property.
8. Protect your Intellectual Property (IP)
Intellectual property includes any work that is the result of creativity, including inventions, discoveries, know-how, or processes. Ensure that employees and independent contractors assign new technologies or processes they develop to your company. Properly register trademarks and license software to third parties.
Many times, the profitable verticals of a business evolve. Ownership of intellectual property in a relatively insignificant area may be critical for future success.
9. Be aware of your rights
It is said that knowledge is power. Nothing is as important as keeping yourself armed with adequate information on business laws. Every recognised type of business has laws regulating their operations. Some of the legal aspects of business you must be familiar with include the following:
10. Seek necessary legal assistance
Sometimes, you might perceive a legal problem to be small when in fact the problem can potentially impact your business in ways that only a legal expert can foresee. While you can certainly read up on a particular legal issue if you have the time, it’s best to consult with a legal expert who can anticipate various legal pitfalls your company might encounter. Wrong decisions or inadequate legal documents can cost you! In an effort to save money, small business owners may try to draft documents themselves. Oftentimes, it is significantly more expensive for a legal expert to go back and fix these documents than to simply have the expert handle the matter from the outset.
Your business must be built on a sound legal foundation. Follow these easy-to-implement legal tips to protect your business interests.
To explore business opportunities, link with me by clicking on the 'Invite' button on my eBiz Card.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.
Posted byRipple Nagpal
I am looking to connect with other business owners and ready to work around the referral models for mutual benefit. Invite me to connect
Recommended articles for you