Common Small Business Legal Mistakes

Small businesses make legal mistakes all the time—some of which can be disastrous. But knowing what pitfalls to watch out for can make all the difference. Below are some of the most common.

Not Having Good Written Agreements

All of your important business agreements must be in writing. Oral agreements are usually not enforceable, and leave you with no recourse for compensation or legal action. Make sure your contracts are well thought out, drafted in your favor and give you flexibility and protection. Read Where Can I Find Sample Business Contracts? for a wealth of contract resources, including templates.

Unclear Expectations and Rules for Employees

It's important to set clear expectations and rules for your employees. Make sure they acknowledge they are "at will" employees, which means they can quit or be terminated at any time without exposing your business to liability. It's also important to inform your employees that discrimination, sexual harassment and other illegal acts will not be tolerated. Read Does an HR Manual Have to Be in Writing? to get some direction on setting forth your guidelines and expectations.

Not Getting an Experienced Corporate Attorney

Every growing business faces issues that require the services of an experienced attorney. Issues such as stock-option plans, employee negotiations, state and federal tax rates and intellectual property rights all require a corporate lawyer experienced in representing start-up and emerging companies. And though such attorneys charge more than generalists do, the money you spend on experience will save you time, aggravation and money in the long run.

Ignorance of the Law

Just because laws are numerous and complex doesn't mean your business can ignore them. Learning a little about the following basic areas of the law can keep you out of legal hot water:

Basic contractual rules