When you’re starting a new business, you have a lot of things to consider – and all too often people overlook a lot of basic things. They are so enthusiastic about the idea of running their own business that they get hung up on executing the idea and forget about the practicalities of ‘running the business.’ There are many legal measures that are important – and that must be followed if you want to protect your company’s future. Let’s take a look at some common legal mistakes.
No Limitation of Liability
If you hold assets, allow members of the public into your business, or give advice, then you need limited liability. Indeed, it’s fair to say that every business should have limited liability. If someone uses a product you made and gets hurt, they might sue you. If someone gets hurt on your premises or suffers loss because of the advice that you have given them, then you could be liable. Limitation of liability, through the right legal structure, will protect you. Be sure to get legal advice before setting up a company. There are different accounting requirements for limited companies compared to a sole trader or a partnership, and that’s something that you will need to familiarize yourself with so that you don’t get caught out at the end of the financial year when you’re rushing to finish your reports.
Not Getting Contracts From Clients
Another issue that a lot of less business-savvy people run into contracts issues. If you’ve worked for a company for a long time and you’re used to just doing what your boss tells you, then you might be a little easy going and accept deals sealed with a handshake. If you’re lucky, you’ll get away with that for a while – but there’s always the risk that something could go wrong and that you’ll end up dealing with someone who is not willing to follow through. If you don’t have a contract, you’ll have no recourse. Always get things in writing, so you don’t get hurt.
Not Checking the Company Name
You are required to pick a company name that is unique – or at the very least unlikely to cause confusion with other customers. If you’re a sole trader running Joe’s Sandwich Shop in one city, and another person has Joe’s Sandwich Shop in an entirely different state, that’s not likely to cause issues. However, if you run Sally’s Online Shoe Shop and there’s already another online shoe shop with the same name, that’s going to cause a problem. Don’t wait until you get a cease to change your name. That could be expensive. It could destroy your brand.
You would be much better off if you picked the right name, to begin with, so that you didn’t need to redo your logo, reprint your stationery, do a new website with a new domain name, and work on your branding.
It pays to do your homework before you start trading. Learn as much as you can about what it takes to run a successful business. Talk to some business advisors and learn what you can do to prepare the business and get it off to the best possible start.
Running a business can be a lot of fun, but it is a big responsibility as well. It does give you freedom, but you still have a legal responsibility to keep good records, file your tax returns, pay your employees properly, and make sure you have insurance to protect yourself, your customers and your employees.
There are plenty of business advisors that will help you to plan and prepare your business, and that will highlight any potential issues or things that you might have forgotten. Don’t get so hung up on getting your business going that you launch without having the correct procedures in place. One mistake or unfortunate series of events could cause you a lot of trouble and could set your business back a long way – especially if you attract the attention of a bigger company that is concerned about intellectual property. Take advantage of the expertise that is out there. You won’t regret it.