Three Legal Traps Every Small Business Can Avoid

Cost savings are top-of-mind these days. Yet nothing can wipe out your hard earned profits faster than a legal problem.  Business lawsuits are costly (sometimes resulting in bankruptcy), time consuming, and emotionally draining. While many small business owners are rightfully concerned with cutting costs on a day-to-day basis, few think about protecting themselves against one of the most dangerous threats to their budgets as well as their companies as a whole: a legal problem.

Here are three tips to help you avoid the most common legal traps that small businesses can unknowingly fall into:

Establish employment policies. Good employment policies and practices are one of the best business investments you can make. They help employees know what’s expected of them by giving them clearly defined performance standards.

Unfortunately, even the simplest policy statements are pretty boring. You can make them more user friendly by breathing life into them with periodic training that helps employees apply the policies to their everyday work. There’s nothing like face to face training to answer employee questions, clear up any confusion, and create a solid basis of understanding. 

When applied consistently, policies avoid perceptions of unfairness that can escalate into legal claims. After all, policies don’t manage anything.  It’s the employees who apply the policies that make things happen. Connecting the dots between policies and people is essential. 

Getting a set of policies in place doesn’t necessarily require a lawyer. A good human resource consultant can get you started.

Protect your brand. Your customers recognize your business by its name and your product brand names. These names symbolize your company’s distinctiveness -- its style, service, and products.  You spend countless hours and dollars to build those assets.  Imagine how disruptive it would be if someone else used those names without your permission. They could capitalize on your goodwill.  You can protect those valuable assets by seeking trademark protection. If you don’t have trademark counsel, one of the many online services such as LegalZoom can help you out.

Negotiate Good Contracts. Good contracts, like good employment policies, are invaluable for clarifying and managing expectations between you, your customers, and suppliers. They help avoid unnecessary and expensive surprises. Negotiating warranties, limitations of liability, and termination provisions you can live with will save much unpleasantness later on if the deal crumbles. And if the deal is a success, the contract negotiating process will have served to build and strengthen the business relationship -- to foster trust and provide a foundation for continued growth.  When it comes to contracts, an hour or two spent with a transactional lawyer who is familiar with your business is an investment in your peace of mind.