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Legal Mistakes That Often Catch Out New Business Owners

Legal Mistakes That Often Catch Out New Business Owners


Small business owners are some of the busiest people in the world. On a tight budget, they have to cover as many duties as possible by themselves, which usually means working long hours, seven days a week until they start bringing in enough money to hire some employees. When you’re working under these conditions you’re likely to make mistakes. Most of those slip-ups will be minor things that can easily be sorted, but others can be a little more serious.

There are a lot of legal aspects of running a business that you won’t have dealt with in the past, and they can get pretty complicated. If you’ve got the cash to hire a lawyer to help you work through it, that’s great. But most new businesses just don’t have room for it in their budget. If you can’t get to grips with those tricky legal issues, you could do your company some serious damage. Luckily, we’ve put together a list of the most common legal mistakes that businesses make and how you can avoid them.

Not Registering Properly

Any business that’s making money needs to be registered as a company. A lot of people are making viable businesses out of things that were previously a hobby. If you start out selling a few bits on Etsy or eBay, you don’t need to register. But when you start to expand, you should. However, lots of people don’t know when this transition should take place and they end up operating illegally without realizing it. Speak to experts at Your Company Formations and they’ll walk you through the process. They’ll also help you to work out what the correct structure for your business is.

When you register you’ve got a couple of choices. You might be a sole proprietorship, a partnership, or a corporation. If you make a mistake and register yourself as a sole trader instead of a partnership, for example, you’re going to run into some problems when you’re doing your taxes, which brings us to our next problem.

Doing Your Taxes

The tax laws for businesses are a lot different from personal ones and, you guessed it, a whole lot more complicated. The tax service isn’t going to have any sympathy if you make mistakes either. If things aren’t right you could end up with a hefty fine at best. You could also end up paying more than you need to if you’ve filled out the paperwork wrong, which isn’t ideal when you’re working on a tight budget. Take the time to read up on all of the tax laws. It’s not going to be a thrilling read but it makes things so much easier for you in the future.

Intellectual Property

You’ve come up with an amazing idea, built a few units and sales are going great. Then all of a sudden, a big company comes out with the exact same product under a different name, for half the price. Your sales drop off overnight and there’s no way you can compete. What happened? You didn’t protect your intellectual property, that’s what happened. You might have trademarked the name but that doesn’t mean you have exclusive rights to the actual product. The first thing you should do when you come up with a great product is get a patent on it. Keep it close to your chest and certainly don’t start selling it, if somebody else picks it up and puts their own patent on it, there isn’t much you can do about it and you won’t be able to make your own product anymore.

HR Policies

You probably yawn when you hear the phrase HR policies but you should pay more attention because they could land you in jail. That’s a worst case scenario but it can still happen. You’re required to keep certain records on all of the people that you employ, as well as providing certain services and grievance procedures. If you aren’t up to code, your business could be shut down and you could find yourself facing criminal charges in certain cases. When you’re hiring an employee to head your HR department, don’t spare any expense. Find somebody with a lot of experience that knows how it all works. Let them know that they have access to whatever resources they need to make sure you’re complying with the law.

All of that legal stuff is pretty dull and it’s one of the worst parts of being a business owner. But if you neglect it and don’t take the time to learn it, you won’t survive.

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