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There are several mistakes that a small business owner can make that will cause the company to fail long before it could, and without using a lawyer to assist with these problems, the owner may no longer have a business to run. Hiring a business lawyer early is often the best advice to take from other experts and professionals that own a small business.
Put Everything in Writing
Many small business owners commit serious mistakes when they do not put everything in writing. This may provide the means to look back at what happened previously as well as ensuring fewer problems arise in the future when the process is already in place. Additionally, there are certain documents that demand physical representation to help the business along. These are the operations management processes and ownership. Some may even help to keep partner conflict from harming the company. Others explain how a partner or owner can pass on interest to a new person. Paperwork should also exist for interest, shares or stock information.
Planning for the End
Many business owners of even large corporations fail to plan for the end of the company or the end of the owner’s involvement. It is important to implement a buy-sell provision to ensure that someone will take over or purchase the business at the end of the life of the company or when the owner decides to sell or retire. If the owner or a partner dies, he or she may leave behind interest to a family member or to the other partners. A buy-sell provision can either prevent this situation or provide a means to sell the interest to a new party that all members approve of and will embrace within the company.
The Employee Agreement
It is possible for the small business owner to make various mistakes when hiring employees. Among these issues is that of the employment agreement with inadequate provisions. This document is the foundation for the hiring between employee and owner. Some conditions of employment will determine if the worker will remain for a length of time or is an at-will employee. The classification will also affect taxation, and any rights, restrictions or termination should have specific details in the agreement. It is possible with an inadequate employee agreement, the owner can expose the company to various forms of liability.
Classification of Employees
The classification of each employee requires specific understanding and details for tax purposes. This then requires that the employer knows what these are and how they would apply to each worker within the company. The mistake of misclassifying one could cost the owner considerably. The classes will explain if the employee is exempt from taxation within the company, is an independent contractor or a full-time employee. Some are salary workers and will not incur the same tax penalties as others. This could also affect the hourly rates the employee will earn or benefits he or she could receive.
Restrictive Covenants
There are many employers that fail to use or implement restrictive covenants effectively. When the owner wants to stop employees from working with competitors within a certain number of months or years after termination nor leaving the business, the employer will need an enforceable agreement. The primary mistake in using these is that most have a bare-bones version available. However, without a business lawyer making the agreement fit the situation, the mistake could cost the small business greatly. Other restrictions are legitimately placed in the company to avoid complications with intellectual property and the loss of business that could occur when the worker reveals a trade secret or other IP details.
Engaging a Lawyer to Help Avoid Mistakes
A legal professional can help ensure that all processes, methods and rules in the company are in writing. He or she may have someone work with the employer or review the materials for future use. An effective buy-sell plan is another task the lawyer can file away for a later date. This may include operations agreements, how to sell or merge the company later or even when the business will pass to a family member or a manager. The legal professional will also need to analyze the employment agreement to ensure there are few mistakes or problems that could harm the employer later.
Both classification and restrictive covenants may require local state rules applied that the lawyer would know. The lawyer can research these and ensure the right paperwork exists for each situation.
Provided by HG.org