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Common Legal Issues & How Your Business Can Avoid Them

Starting and running a business is no walk in the park. It will take lots of effort and hard work to achieve the success you are hoping for. While doing all that, do not forget about legal issues. There are many legal issues your business could face. Being aware of what these are will help you avoid them. Remember that legal issues could lead to hefty fines in court, jail term, or closure of the business. You cannot afford to risk it all by being ignorant of the law. Read on and see what common legal issues are in the business world. You will also learn how to avoid these issues.

Choosing the Wrong Business Structure

There are various types of business structures and the one you choose determines what your legal obligations are. It also determines the operations of the business. The options you have are:

  • Sole proprietorship
  • Limited Liability Corporation
  • Partnership
  • S corporation or C corporation

The liability associated with each type of structure needs to be understood. In sole proprietorship and partnerships, the business owners are liable for the business actions and operations. This means that your personal assets could be used to pay off business debts in case of a legal action. On the other hand, limited liability businesses and corporations are legal entities that are liable for any wrongful doings. The owners do not stand the chance to lose personal assets over issues. However, the LLP and corporations are harder to set up and register.

As a business owner, you need to choose the right structure from the beginning. Look at each option carefully before making the final decision.

Employee Issues

Your employees are important in the operations of your business. You need to ensure that they are working for a fair wage among other legal issues. Each employee’s duties and roles should be defined and a written copy made available to the employee and on file. The terms of employment also need to be indicated. This can either be part-time or full-time depending on the number of hours they work. Legally binding contracts should be prepared for all employees to sign. You may include a non-disclosure agreement here to avoid future issues with leaked information. The performance expectations and company mission should be clearly stated. To help you create the perfect legal paperwork for your staff, work with a qualified attorney. For example, you could speak to Knoxville Tennessee lawyers about your unique situation pertaining to your business. They will not only help you abide by the law but also represent you in case of a small business lawsuit.

Discrimination and improper termination are common legal issues that businesses face. You cannot discriminate against a worker based on their age, gender, race, or physical appearance. Equality must be exercised at all times. If not, an employee who feels discriminated against could sue you. Termination of services should be done in a legal manner. Draft a termination notice that clearly explains the reason for the termination and have the employee sign it.

Work safety should be assured. Have policies that show how this is to be implemented and adhere to them. Minimize chances of on-job injuries by carrying out safety training among staff often.

Tax Issues

Is your business supposed to pay taxes? How much should you submit and how do you do this? You need to gather all the tax information you need to operate smoothly. Withholding tax is a very serious crime that could land you in jail. The amount of tax to pay will depend on the type of business entity you are running. It will also differ from one state to the other. Talk to the tax regulator and get answers to any questions you may have. Submit all the required taxes in time and file returns to avoid any issues.

Proper record-keeping is necessary to show your compliance with taxes. Even if you paid all your taxes in full, you cannot prove this if you do not have proper documentation. Get good bookkeeping software and staff to handle this.

Many Other Legal Issues

Businesses are legal entities that are regulated by strict legal requirements. Other than taxes, employees and business structure, there are many other legal issues you could face. Failure to protect your intellectual property such as ideas, trademarks, and copyright could cause them to be stolen. Stealing such protected property on the other hand will land you in trouble. Working with vendors without proper contracts in place or not adhering to signed contracts could also lead to legal issues. No matter what type of business it is you are doing, take necessary precautions to ensure you steer clear of legal issues.

Author information: Rayanne Morriss is currently working towards her BA from Oregon State University. She loves to read, travel, and paint. She enjoys finding new coffee shops with friends and expanding her cooking skills.

Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

About This Blog

The title of this blog reflects my attitude toward those government agencies and insurance companies that routinely mistreat injured or disabled people. As a Dallas, Texas lawyer, I've spent more than 45 years trying to help those poor folk, and I have been frustrated daily by the actions of the people on the other side of their claims. (Sorry if I offended you...)

If you find this type of information interesting or helpful, please visit my law firm's main website at You will find many more articles and links. Thank you for your time.

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