The legal system is a complex and often confusing one. Even businesses that often tend to go by the legal books can find themselves in hot water if they make small mistakes.
For example, suppose your business is in the food or beverage industry. In that case, you may be required to maintain certain sanitation standards and abide by laws designed to protect customers from food poisoning. You must ensure that your kitchen equipment is properly cleaned and maintained. Failing to do so could lead to a lawsuit or other legal action.
The good news is that there are many things you can do to avoid legal trouble from the start—and we’re here to help you out! Read on!
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Have a Clearly Defined Business Structure
This will define how your business is legally organized and operated. The four most common types of business structures are:
Sole Proprietorship: A sole proprietorship is owned and operated by one person. This structure is simple and easy to set up, but it offers no personal liability protection for the owner. If your business is sued, the court can go after your personal assets, such as your home or savings account.
Partnership: A partnership is a business owned by two or more people. Like a sole proprietorship, the owners have no personal liability protection. Each partner is equally responsible for the business’s debts and obligations.
Corporation: A corporation is a legal entity that shareholders own. The advantage of this business structure is that it offers personal liability protection for the owners—that is, the shareholders cannot be held personally responsible for the debts and liabilities of the corporation. This can be a great option if you are worried about being sued or held liable for something that goes wrong with your business.
Limited Liability Company (LLC): An LLC is a hybrid between a sole proprietorship/partnership and a corporation. Like a corporation, an LLC offers personal liability protection for the owners. But unlike a corporation, an LLC is not taxed as a separate entity—the taxes “pass-through” to the individual owners. This can be a great option if you want the personal liability protection of a corporation but don’t want to deal with the hassle (and expense) of setting up and maintaining a separate legal entity.
Choose the Right Business Name
Your business name is more than just what you call your company—it’s also a key part of your brand identity. But did you know there are legal implications to choosing a business name?
For example, you can’t choose a name already used by another business in your industry. And if you want to use a name that is “suggestive” or “descriptive” of your products or services, you may need to trademark it to protect it from competitors’ use.
Get the Right Licenses and Permits
Depending on your business activity, you may need to get one or more licenses or permits before starting to operate. For example, if you sell food products, you must get a food license from the area where your business is located.
If you are providing professional services, such as accounting or legal services, you may need to get a professional license from the area board that regulates your profession. You can also consider a VAT return services agency to help with the paperwork.
Be Clear in the Documentation
No matter your business type, it’s important to have a clear contract for each client or customer. The contract should spell out the scope of work, the price, and the terms and conditions of the agreement. This will help to avoid misunderstandings and disputes down the road.
Final Word
Starting a business is a big undertaking, but it doesn’t have to be overwhelming. If you take the time to do your research and prepare in advance, you can steer away from legal troubles. Still have any questions or concerns? Feel free to ask us in the comments!