Small businesses employ nearly 59 million Americans. This means that about 47.5% of U.S. employees work for businesses of 500 or fewer employees.
Unfortunately, many of these businesses have limited resources and owners are tasked with wearing many hats, including that of accountant, lawyer, and human resources expert, to save money. However, this can occasionally cause problems to escalate and cost more money than was originally saved.
There will be times that hiring a lawyer will not be necessary. For example, applying for a business license will not require a great deal of business law information. But other times, trying to handle your business’s legal issues yourself could put your business’s existence on the line.
Here are some circumstances when you should consult a lawyer for business law information before taking any action:
Forming a Business
You will benefit from solid business law information almost from the start of your business. Choosing whether to operate as a sole proprietorship, partnership, corporation, s-corporation, or limited liability company (LLC) could be one of the most impactful decisions you male. Yet this decision is often treated as an afterthought.
Making the wrong choice, however, could have serious consequences long after the business was formed. For example:
- Taxes: Sole proprietorships, partnerships, s-corporations, and LLCs are taxed differently than corporations. The differences could expose you to paying much more in taxes than necessary.
- Liability: Corporations and LLCs protect owners from personal liability for corporate liabilities. Sole proprietorships and partnerships can leave owners exposed to lawsuits and debts incurred by the business.
- Control: If you have investors or co-owners, the structure you choose will determine how much control they have in your day-to-day operations. The form will also determine their rights with respect to the business and you, their fellow shareholder or co-owner.
Another decision that justifies contacting a lawyer for business law information is your choice of a business name. If a trademark dispute pops up after you have printed business cards, purchased a sign, and started marketing, you could face substantial business losses. However, consulting a lawyer about your chosen name before incurring any expenses could reduce the risk of infringing on someone else’s trademark.
Receiving a Demand Letter
There is no worse feeling in running your business than receiving a demand letter, also called a cease and desist letter, from a lawyer. However, you need to face demand letters head-on by consulting a lawyer and gathering as much business law information as you can.
To be clear, a demand letter is not a lawsuit. Rather, it is how a lawyer lets you know that the lawyer’s client is unhappy with your business and that you can avoid a lawsuit by doing what the letter asks. Usually, the letter asks you to “cease and desist” something your business is doing, hence the nickname “cease and desist letter.”
Demand letters can be sent out for a variety of legal claims. Trespass, defamation, and breach of contract are a few common disputes that might trigger a demand letter. However, the most common reason to receive a demand letter is an advertising injury.
Advertising injuries commonly occur when your advertising and marketing companies distribute something that steps on someone’s rights. For example:
- Defamation: If your marketing makes a false claim about a person or another business’s goods or services, it might be defamation.
- False advertising: If your message contains a false or misleading statement about your own products, it might constitute false advertising.
- Trademark infringement: When you use a name, logo, symbol, or another identifier that is confusingly similar to another business’s, it might be trademark infringement.
- Copyright infringement: If your marketing and advertising uses someone’s creative work, such as text, music, artwork, or video, without permission, it might violate that person’s copyright.
Receiving a Tax Notice
A notice from the Internal Revenue Service or your state or local tax agency can be intimidating. However, if you search for the best tax lawyer in your area and arm yourself with the right business law information, you should be able to deal with the problem.
Frequently, a tax notice merely informs you of an adjustment to your tax filing that the agency made on your behalf. For example, an obvious mathematical error that does not change the bottom line could be corrected this way.
Occasionally, the error is more substantial and requires you to correct the tax filing. This can often be corrected by your accountant and may only result in minimal taxes owed.
The notice that can induce stress, however, is an audit notice. An audit means that the tax authority wants to review your records to make sure your taxes were correctly reported, calculated, and paid. Due to the complexity of tax laws, audits represent a high risk that the auditor will find a mistake. Worse yet, an auditor might find a series of mistakes caused by a fundamental misunderstanding of the law or a deliberate effort to avoid taxation. In these cases, you will not only need a lawyer for advice before the audit. You might also need a lawyer at the audit with you to try to explain how the underpayment occurred.
As your business takes off, you may start hiring employees. However, before hiring anyone, you should consider consulting a lawyer so you have business law information about hiring and firing workers.
For example, when you hire employees, you are expected to comply with employment non-discrimination laws. As you onboard your employees, you will need to comply with employment laws in notifying them about workplace policies and safety rules. When you pay your employees, you must comply with IRS laws and regulations about withholding taxes. And when it comes time to fire a worker, you have to comply with employment laws governing how and why you can fire someone.
For example, you cannot fire someone due to their gender, race, religion, or disability. However, you can fire an at-will employee for almost any other reason. This means that an employee with a messy desk or a record of chronic tardiness can be escorted outside your security fences and told not to return.
However, many employment lawyers recommend developing an employee handbook that details all your workplace policies along with the consequences for violating them. This allows you to document that the employee was on notice of the policies and was fired for policy violations despite that notice.
Reporting a Workplace Injury
Workplace injuries are inevitable. Whether the cause is repetitive stress, a workplace accident, or toxic exposure, every business is at risk of employee injuries.
When a business owner becomes aware of a workplace injury, the owner is obliged to notify the business’s workers compensation insurer to open a worker’s comp claim. Depending on the nature of the injury, your employee might hire a work injury compensation lawyer to help with the claim.
While you should be wary of the injured employee’s lawyer because the lawyer may be looking for ways to sue you. Normally, employers are immune from lawsuits filed by their employees. However, if the accident was a result of bullying or deliberate efforts that undermined health and safety regulations, the lawyer might be able to argue immunity from suit was lost.
Being Contacted By an Injured Customer
Customers who are injured in your place of business, by your employees, or by your products or services may be able to sue your business for:
- Premises liability: Under the doctrine of premises liability, you can be sued if someone is injured in your place of business by a hazard that you knew about or should have known of.
- Negligence: Any person harmed by your employees while they are working would likely try to place responsibility on you.
- Products liability: If someone is injured by your products, you could be sued for products liability.
It may be possible to insure against these types of claims. Specifically, a general business liability insurance policy might cover you for lawsuits for negligence and property insurance might cover you for premises liability. If you have insurance and your business receives a letter from a personal injury law practice claiming a customer was injured, you should notify your insurer immediately.
Expanding Your Business
When your business is successful, you might decide to expand your business by opening additional locations. As you decide how to do this, you can collect business law information from a franchise law attorney.
One choice would be for you to own all the locations. If this is your preferred ownership structure, you will be responsible for running the entire chain of businesses.
Another option would be to sell franchises to franchisees. These franchise owners would pay a franchise fee and be obligated to run the business exactly as you instruct them. They would also buy supplies from you and your suppliers. As a result, you will generally make less money from a franchise but will be able to delegate the responsibility of running the franchise to someone else.
Discovering Employee Misconduct
When an employee misbehaves on the job, you might be responsible for taking action against the employee, such as firing the employee. If you do not, you could become responsible for the employee’s behavior.
For example, if one of your employees sexually harasses your other employees, a failure to take action against the workplace harasser could expose you to a lawsuit for creating a hostile work environment. Similarly, if your employee habitually arrives at work drunk or high, a failure to take action could make you responsible for injuries caused by drunk driving while on the job.
If your business is the victim of the employee’s misconduct, you may want to consult a lawyer for business law information before contacting the police. For example, if you believe an employee is stealing from you, a lawyer could quietly investigate your claims before you contact the police. This will help you avoid a false accusation that could expose your business to a lawsuit from the wrongly accused employee.
Disputing a Contract
Occasionally, you might get into a situation where you disagree with a person or business you entered into a contract with. For example, you might agree to supply parts to a manufacturer at a certain price, but the manufacturer never pays you.
When this happens, you have a few choices.
- Negotiation: You can try to get the other party to live up to the contract. Sometimes they will have a good reason for not performing as contracted and you will be able to work something out.
- File a lawsuit: Occasionally, you cannot work out a deal with the other party and you decide to file a lawsuit to try to recover the damages your business suffered. This can be costly and time-consuming. However, this might be the best option for large damages or damages that are hard to quantify.
- Sell the debt: You might be able to sell the debt to a debt collector. You will usually only receive a fraction of the debt’s value, but for small debts you can earn a little bit of what was owed and leave the responsibility of collecting the debt to debt collectors and debt negotiation attorneys.
If there comes a time when your business’s revenue and assets are insufficient to cover your business’s debts and expenses, you might need to talk to a bankruptcy lawyer to collect some business law information so you can examine your options.
The benefit of bankruptcy is that bankruptcy immediately stops all lawsuits and collection actions against your business. It also encourages creditors to work in good faith to restructure your debt to avoid getting pennies on the dollar.
The disadvantage of bankruptcy is that your business’s credit rating could be wiped out and your business will be unable to get loans or even credit cards for several years. With a restructured debt hanging over the business, the lack of credit could spell doom for the business.
One alternative to bankruptcy is to try to negotiate with your creditors to restructure your loans without declaring bankruptcy. If your business troubles are only temporary, creditors might be willing to agree to a restructuring.
Another option would be to take on an investor for a quick infusion of capital into the business. If you have access to venture capital, this might be a good option. However, you should do some research and collect business law information on the various ways to structure the investment so you do not lose control of your business.
Finally, you could see if you can sell your business. You might find a person or company that is willing to take on the challenge of turning your business around. If they are willing to pay a fair price, you may be tempted to cash out and move on to your next business.
Running a business is not easy. However, it can be made easier by relying on experts, like lawyers, to deal with problems that require their knowledge and experience.
The U.S. has over 1.3 million lawyers and you should be able to find one to handle almost any problem you have, whether it involves contracts, bankruptcy, or trademarks. By outsourcing legal problems to lawyers you can have the confidence they will be handled correctly. This will free you up to focus on your business rather than playing armchair lawyer and spending your time searching online for business law information.