7 Legal Mistakes Small Business Owners Make, How to Avoid them
Small business owners often turn their attention from issues around the law, human resources, competition and many other sundry issues especially at the very beginning of their businesses. One of the last things in the minds of any entrepreneur, however, is having legal tussles on any front at the very point when the business supposed to begin to blossom. Below are 7 legal mistakes that small business owners make and what they can do to avoid them:
Non Registration/Incorporation of Business
Every business need the right legal foundation and structure otherwise they begin to have issues when they need investors to get on board, they get sued by a customer or employee, or begin to have problems when the founders leave. Not registering your business in the eyes of the law can open it up for personal liability.
The best way out is to get legal counsel from experienced practitioners to determine what best legal structure fits your business in your location.
No shareholding agreement
The shareholding structure of a company becomes crucial when issues emanate from ownership of the company, when the owners decide to part ways there is a need to know who gets what, when it is time to sell the company or when the founder leaves, in any of the above circumstances, a shareholding agreement guides everyone’s actions. Sometimes in business, these foundational issues can rip an organisation apart right in the middle.
Also Read: Small Businesses that Require Less Capital in Nigeria
Seek legal counsel and get an attorney to draft a legal document that states in clear terms how issues of such nature will be decided between shareholders when the inevitable occurs.
Small business scams and unfair contracts
Small businesses are reported to have lost millions to scams and unfair contracts all over the world. One of the common scams small businesses suffer is the issuance of fake invoices which entrepreneurs or bookkeepers will pay automatically. Another is where contract clauses create unexpected upsets. Also, instances, where rollover contracts lead to annual debits, such can lead to stagnated growths in small businesses.
Legal counseling services are always required to assist the small business owner to draw up standard contracts and also assist entrepreneurs to interpret hidden ploys by partners, stakeholders and investors.
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