Common Legal Issues Faced by Small Businesses

If your small business is currently dealing with a legal issue, you’re not alone. About 45% of companies are involved in litigation at any given time.

Consider hiring a small business lawyer in Atlanta, GA, to help you navigate the legal issues small businesses face.

But first, what kinds of legal problems can you expect to face when owning a small business? By familiarizing yourself with these issues, you can work on preventing them from impacting your company in the first place.

Here are several common legal issues small businesses face and tips on what your company can do to avoid them and stay on the right path.

Business Formation Problems

One of the first legal issues small businesses face can present problems before they’re even officially off the ground. It involves the legal structure they choose when setting up their small businesses.

Small business owners can select whichever legal structure they want based on their specific setups. Options include:

• Sole proprietorship or Partnership
• Limited liability company (LLC)
• Corporation

While small business owners are welcome to choose the legal structure they feel will work for their companies, they need to understand how each one works and why choosing the correct legal structure matters. Otherwise, they could soon find themselves in legal hot water.

If, for example, a small business owner decides to form a corporation, they will be subject to more regulatory compliance than if they formed a sole proprietorship or an LLC. They must be ready to adhere to the necessary regulations or risk facing legal issues.

Contract Disputes

Small businesses rely on contracts to protect them legally as soon as they start selling products or services. They sign contracts with employees, vendors, clients, other small businesses, and others.

Some of these contracts can inevitably lead to disputes between your small business and the other parties who have signed them. Communicating with these parties about how to handle contract disputes in advance can help overcome them and prevent legal headaches later.

However, some contract disputes can only be resolved with legal intervention.

Millions of contract lawsuits are filed annually, making these disputes another common legal issue small businesses face.

Employment Law Compliance

Small businesses might launch with one or two employees but typically add more as they grow. When they do, they must follow all relevant employment laws. In addition to the legal benefits, this keeps employees happier and more motivated by showing that their employers have their best interests in mind.

If your small business neglects to take this approach, it could lead to many issues across the board. You may, for instance, face lawsuits if those who have applied for jobs with your company can prove that you denied them employment based on their:

• Gender
• Age
• Race
• Religion

In these cases, people can claim discrimination on the part of your small business and earn a legal victory.

Additionally, your small business must abide by many other employment laws. Here are just some of the major laws that should be on your radar:

• Fair Labor Standards Act: Establishes guidelines for fair wages and overtime pay
• Occupational Safety and Health (OSH) Act: Sets health and safety standards to protect everyone in the workplace
• Family and Medical Leave Act: Provides new parents with the right to job-protected leave

If your small business doesn’t demonstrate employment law compliance, it could put your company in a precarious legal position.

Intellectual Property Protection

Small businesses own many different forms of intellectual property. Everything from their business names to their logos to their other branding materials can serve as intellectual property.

Your small business should go by an original name that isn’t a trademark of any other company to avoid unnecessary legal battles. It should also secure trademark rights for logos, branding materials, etc., to protect them. You might not have any legal recourse if you fail to claim these types of intellectual property.

At the same time, you should also be careful about utilizing another company’s name, logo, or branding materials. If you do, it could cause legal troubles for your small business.

This is one of the more complicated issues small businesses face. Some businesses have no choice but to scrap their initial plans for their companies after being caught using trademarked names, logos, and branding materials, however unintentionally.

Taxation Issues

The federal and state tax laws for small businesses are complicated. How a company is structured could play a huge part in how it’s taxed, which explains why companies must create the right structures from the start.

If you own a small business set up as a sole proprietorship, partnership or an LLC, it won’t usually be subjected to corporate income taxes. Instead, you will pay personal income taxes on any earnings you make as an individual.

Corporations are different in that they are subject to corporate income taxes, and their shareholders are also taxed on their dividends. However, even within the confines of this example, it isn’t always straightforward. Various kinds of corporations, including S corporations (S-corps), C corporations (C-corps), and non-profit corporations, are all subject to different taxes.

If you do not pay the correct taxes for yourself and/or your company, it may result in taxation issues. It would be worth working closely with an experienced business tax accountant to ensure you pay the proper taxes.

Need Help with One of the Legal Issues Small Businesses Face?

The legal issues small businesses face range from relatively minor to potentially putting companies’ futures at risk. MacGregor Lyon, LLC can help if you want to steer clear of them.

We offer a variety of legal services for startup companies and small businesses.

Whether you need help choosing the correct legal structure for your small business or require assistance with regulatory compliance within your industry, we have the services that can benefit your company.

Are you interested in learning more about them? Contact us at (404) 897-0538 to speak with a trusted small business attorney.