It can be dreadfully difficult to be a small business owner these days. Often you're a one-person shop, and it can seem like a handful of full-time jobs just to keep up with your legal responsibilities on top of everything else. Unfortunately, one of the easiest ways to land yourself in a nightmarish scenario is not knowing what you don't know -- or worse, acting upon false assumptions about the law and your business. If you haven't already, sit down with a lawyer and a bowl of Halloween candy to define a legal strategy for your business. Being proactive about your legal needs now can save you a lot of time, money, and boo! moments down the road.
Myth: You and your personal assets are always 100 percent protected after you incorporate.
Fact: When you mix your personal and business funds, you leave yourself vulnerable to IRS investigations and potential lawsuits. No small business owner wants to put their personal assets at risk, which is why many will incorporate. Incorporating generally provides a legal separation from your business and protects your personal assets. It won't protect them all of the time, though. Like many small businesses just starting out, you may have to co-sign to purchase the assets you need to run your business. When you co-sign as an individual, you are personally on the hook if the business defaults, even if you are incorporated. Remember, if you mix your personal and business lives too much, you may lose your personal asset protection.
Myth: You don't need to protect your IP assets, and it's too difficult anyway!
Fact: You know that moment in every horror film where the main character makes a blissfully ignorant, crucial mistake? Avoid that plot-turning moment with your small business: don't procrastinate getting the right patents, copyrights, and trademarks for another second. The time and resources it takes to protect your company's most valuable assets -- your ideas, inventions, and unique brand -- will be minimal compared to how much you may lose if your intellectual property is not protected.
It's hard to deny that the process can be daunting -- and expensive. For example, simply submitting a trademark application does not guarantee an approval from the USPTO. However, a new classification of SMBs and the rise of electronic filing systems have helped lower costs and expedite the process, making it easier than ever to ensure that you will profit from your work without fear of exploitation by competitors or accidental copycats.
Myth: You will get sued if you don't provide health insurance to your employees.
Fact: Ninety-seven percent of businesses in the U.S. are not required to provide health insurance for their workers. Why? Because these companies have fewer than 50 employees and the Affordable Care Act's "employer mandate" only applies to businesses with over 50 full-time staff -- so you can forget all the scary ghost stories floating around about changes to your health care requirements. However, to make sure you protect yourself from a long list of other HR horrors, be sure to formalize your employee relationships with the right tax classification and an employee handbook detailing company policies and expectations.
Myth: You never need to consult with an attorney when making "simple" contracts.
Fact: Contrary to popular belief, a written contract can be broken in many ways. For example, courts can declare a contract not binding if it wasn't created adequately or contains terms that are illegal. Although it may seem appealing to hurry through your contract creation process, a great way to be sure that your contracts are legally enforceable is to consult with an attorney. With services like Ask A Lawyer, you can talk to an attorney at any step of the process. A good lawyer will make sure that your contract isn't full of legal gobbledygook that might scare off potential vendors and partners, and help you minimize fears of disputes and litigation. Attorneys aren't just a necessary evil to use as a last resort, so don't be skittish!
The bottom line: As a small business owner, you've got something worth protecting. When it comes to legal matters, what you don't know can really hurt you, your finances, and the long-term success of your business. And that's the scariest outcome of all!
Lisa Honey is the Business Lead for Rocket Lawyer's Legal Documents business line. She left the traditional practice of law after seven years in commercial and civil litigation to join Rocket Lawyer. She's licensed in California, Texas and Arkansas.
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