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News around Africa - Profiles - Startup - January 9, 2020

7 Most Common Legal Issues for Businesses, How to avoid them

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 is having legal tussles on any front at the very point when the business supposed to begin to blossom.

Here are the 7 most common legal issues for businesses or legal mistakes that 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.

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.

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 counselling 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.

Human resource guidelines not well laid out

There is a great need to have a clear cut and detailed employee manual. Many small companies run into brick walls and gone under owing from lawsuits from aggrieved employees. This is where a well-structured employee rule-book becomes imperative.

The way out is to get the assistance of human resource personnel to develop a fitting policy for your company.

Also Read: How I Grew Bee-Keeping into a Multi-Million-Naira Business – CEO, Alpha-Cedar

Non-remittance of taxes

Taxes are statutory payments to the government which is backed by the laws of the land. Whether they come in the form of Value Added Taxes, Payroll Taxes, etc, small businesses must make sure that they operate within the ambits of the laws of the country they operate. Most small scale businesses who avoid paying taxes usually end up being shut down or pay huge sums for defaulting which they most likely be unable to afford.

The remedy is to pay all taxes before the deadline so as to avoid accumulation and being hit by penalties and jail terms from the government agencies.

Not using trademarks, copyrights or patents

Many new small-time entrepreneurs fail to take necessary steps to protect their intellectual property right until another individual or company steps in to take it. Intellectual protection is exclusive legal rights for words, names, sounds, ideas, arts, etc, given to a category of services or goods. Meaning that once you have registered that content others cannot use same without your permission.

In order to avoid losing out completely from what you created, make sure you get legal advice from an attorney, do an inventory of the company’s intellectual property and get them patented, copyrighted or trademarked as soon as possible.

Fighting too many legal battles

Unneeded litigations can hamper the growth of small businesses. Instead of settling issues amicably, some business owners decide to slug it out in the law courts and these legal battles can linger for years, costing both parties huge sums than initially intended.

The best way out is to settle disputes as quickly as possible before they get to the courts. But if the lawsuits are already taking their course, find a way to settle out of court.


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