When you are starting your own business, it can be incredibly exciting. However, there are many legal mistakes you can make when just getting started. These mistakes are easy to fix, but if you don't, you could be in serious legal and financial trouble. Check out these four common legal mistakes to avoid when starting your small business.
1. Not Registering Your Business
You don't have to register your business, but if you don't, it automatically becomes a sole-proprietorship. A sole-proprietorship means that you and the business are one and the same. The business' debts are your debts, and your debts are the businesses. Therefore, if someone sues the business, you are personally responsible. Similarly, if someone sues you, you may lose your business. The best bet is to register your business. There are many types of businesses, but an LLC is similar to a sole-proprietorship. The difference, however, is that it separates you from the business, so you are no longer personally responsible for business debts or lawsuits.
2. Forgetting to Get Liability Insurance
You may also get into legal trouble if you don't have liability insurance. Every business that sells, manufacturers, stores or distributes a product should consider product liability insurance. In the event the product is defective and hurts someone, the insurance will cover the cost of the lawsuit. Without protection, the money would come out of the business (or from you if you have a sole-proprietorship). If you provide a service instead of a product, you need professional liability insurance. This type of insurance is most important for attorneys, CPAs, and doctors, but anyone who offers a service should be protected.
3. Failing To Provide a Privacy Policy
If your business markets services or products, you should have a privacy policy. A privacy policy is simply a document that details how you protect your customer's personal information, such as name, address, phone number, credit card information, etc. It doesn't matter if your shop is online only or not online at all; you should have a privacy policy in place. Not only is it usually legally required, but it will help make customers feel more comfortable choosing your business.
4. Ignoring Human Resources
Even if you are a small business with few or no employees, you should start crafting a human resources guide to protect yourself and employees. The HR guide details how an employee should behave while at work, including what they can wear. If you don't have an HR guide, you may not be able to fire employees who don't follow the rules without getting sued. With no HR guide, you have no proof to back your decision.
Running your own small business can be incredibly rewarding, but it can be a disaster if you aren't protected against legal hiccups. If you are ready to protect yourself and your investment, get started today. Find a business law attorney in your area today to see what else you can do to protect your business.
