Top 5 Legal Mistakes most Small Businesses Make - And How to ...

The most common legal mistake that small and medium businesses make is not thinking enough about legal issues.

The five mistakes that follow all have that in common. Legal matters are an afterthought ? if they are given any thought at all ? and it often costs businesses a lot of time and money to clean up the mess that results.

The fact is, small and medium businesses make a lot of legal mistakes, but here are the five most common ones:

They don?t know the law. There are a lot of laws, and business people can?t be expected to know the ins and outs of all of them. But they should have some understanding of the facets of business law that affect them, such as contractual law, employer-employee law, securities laws, copyrights, trademarks and patents, among others.

They don?t understand the documents they sign. And they often don?t understand the obligations they have as a result of signing those documents. M. Christina Floyd, a lawyer in Norfolk, Va., said, ?I had a client whose business was going under, and he said, ?I?m leasing this copier. Can I get out of the contract?? Well, the contract clearly states that he is obligated for several more years. It?s really hard when business people don?t know what they?re signing.?

They cut corners on legal advice. A lot of small and medium businesses have no choice but to be frugal, and they may choose not to hire a lawyer when that is the wise thing to do. ?This is huge, absolutely huge,? said Floyd, whose firm, Hampton Roads General Counsel, works with businesses that don?t have in-house legal counsel. ?Some business folks are penny wise and pound foolish, and they don?t know what they don?t know, and it creates big problems for them.?

They do business without adequate legal documents. This applies to contracts with customers as well as operating agreements, which are equivalent to ?a prenup for a business or a will,? Floyd said. ?You should want to have control over what happens to your business if something does not go as planned, just as you should want to have control regarding your marriage or your estate.? Small businesses are more likely to enter into oral contracts with customers because they are happy to get some business and may think they will jeopardize the business if they require the customer to sign a contract. This, of course, is foolish.

They neglect intellectual property issues. This includes registering copyrights, trademarks, logos and patents. Business people need to make sure that they are protected by protecting their intellectual property, including and especially if they have partners. ?I had a client who was a partner in a company that went under,? Floyd said, ?and at some time later wanted to use the trademark, but he couldn?t because the trademark was in his partner?s name alone, not in both names and not in the name of the business.?

If you?re running a business, you can?t overlook or neglect these and other legal matters. One legal mistake can cost you your business, so make sure you do the necessary research or hire someone who will do it for you.

Mark Di Vincenzo is a journalist with 24 years of experience and a New York Times best-selling author.

Source: http://www.phonebooth.com/blog/2012/07/top-5-legal-mistakes-small-businesses-avoid/

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