Essential Legal Considerations for Business Owners

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If you intend to start your own business, there are some crucial legal considerations that you must bear in mind. The failure to be conscientious when it comes to these essential legal considerations can result in you and your business facing unnecessary challenges.

Establish an Appropriate Legal Entity for Your Business

A fundamental consideration for a business owner is ensuring that you establish an appropriate legal entity for your enterprise. The failure to establish an appropriate legal structure for your business unnecessarily exposes you personally to the liabilities of your venture.

A lack of an appropriate legal entity for your business can leave you personally responsible for financial liabilities of your enterprise. You can also be deemed responsible for injuries and damages suffered by someone else as a result of the operation of your business. This includes injuries and damages caused through the products or services of your business.

The most common types of legal entities created for a small businesses in this day and age are:

  • limited liability company
  • subchapter S corporation
  • partnership

Some people do organize their businesses as sole proprietorships. With that said, by taking that course, you forgo the protections extended by the business organizational structures mentioned a moment ago.

The paperwork associated with establishing one or another of these business structures is not particularly complicated. In most states, the office of the secretary of states maintains an online portal through which you can establish one or another of these business structures.

You can also retain legal counsel to create a legal entity for your business. There are attorneys that specialize in business formation and related issues.

The Vital Importance of Written Contracts

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Another of the fundamental legal considerations a business owner must always bear in mind is the importance of written contracts. The reality is that more than a few business owners can be heard almost bragging about how they “do things on a handshake.” The reality is that failing to have a written contract identifying the rights and obligations associated with a business deal of nearly any type can open the door to negative consequences, and sometimes seriously so.

A typical business will encounter the need for written contracts in a wide variety of situations. These include everything from lease agreements to agreements with vendors to employment contracts.

The arena of contracts represents yet another area in which legal assistance tends to be advisable. There are a myriad of form contracts available to business owners. These forms can be purchased at a number of websites.

A business owners must bear in mind that the use of form contracts has definite limitations. These types of contracts take a one size fits all approach. Thus, the reality is a form contract may not be suitable to the particular needs, goals, and objectives of a specific business.

A business owner also needs to understand that contracts are matters of state law. The terms and conditions of a contract must comport with the established legal requirements of a specific state. As noted, form contracts are cookie cutter documents. A form contract might not meet the legal requirements of a particular state’s laws.

Addressing Employee Issues

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Legal considerations associated with employees represent another area of crucial importance to a business and its owner. The stark reality is that some of the most significant legal issues arise in relationship to a business’ employees.

Legal issues associated with employment actually take form during the hiring process. A business must make sure that it utilizes a lawful recruitment and hiring process when seeking new employees.

A wide range of different legal issues can arise during the course of an individual’s employment with a business. These issues can include everything from allegations of discrimination to allegations of harassment to alleged violations of wage and hour laws.

If legal issues arise associated with a business’s employees, an owner is manager is wise to consider retaining legal representation. Because of the complexity of these issues, coupled with what can be at risk in these types of situations, a skilled attorney is nearly always a necessity.

Do Not Minimize Lawsuits

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A sad reality of being in business in the 21st century is that an enterprise is likely to face lawsuits. Some of these legal actions may have some merit. On the other hand, every year large numbers of frivolous lawsuits are filed against businesses across the United States.

A business must not minimize a lawsuit filed against it. Even if all facts indicate that a particular lawsuit has no merit, a business needs to take it seriously. A lawsuit filed against a business cannot be ignored. It is not likely to go away on its own accord. In the end, having a default judgment entered against a business can prove very costly.

If a business owner ignores a lawsuit, an enterprise can end up having a judgment entered against it. Had a business responded to a lawsuit, the case very well may have been dismissed. Getting a judgment in a lawsuit against a business set aside once it has been entered is not a particularly easy task, even if the facts suggest a lack of merit to the litigation.

Protect Intellectual Property

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Nearly all businesses have some type of intellectual property. For example, a business may produce a product of some type that relies on intellectual property. Examples of intellectual property owned by nearly all businesses includes things like a logo, email lists, products, components of unique services, and other items and processes. These all warrant appropriate legal protection. The last thing a business wants is for its important intellectually property to be used by another business enterprise, including a competitor.

The potential legal issues or matters a business can face can prove to be significant. The best tactic for a business to take when it comes to legal considerations of all types is for an enterprise and its owners and manager to be as proactive as possible.

Meet the Author: Jessica Kane

Essential Legal Considerations for Business Owners 5

Jessica Kane is a professional blogger who writes for Documents International LLC, a leading apostille service for individuals and businesses.


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