There are several pitfalls entrepreneurs need to be wary of. You don’t want to get caught in the quicksand. While this list is far from exhaustive, it is a quick glimpse of the legal issues startups need to be aware of from the moment they go into business, and why it is always wise to enlist the help of a licensed attorney who has experience advising new and existing businesses.

1. Operating Without Contracts

While a contract is never air-tight and dishonest people will almost always show their true colors and try to connive their way out of a contract, a contract helps you fight them and win. As a business owner, you need contracts with everyone you conduct business with including business partners, vendors, customers, landlords, and employees.

From a legal perspective, contracts are essential to enforce your rights against other parties. From an operations perspective, contracts help with organizational memory as your business grows.

“If you have a long term contract with parties and you have new staff coming in and out, contracts help everyone remember who’s responsible for what,” Zachariah Evangelista explains. “It’s not always about conflict. Having your terms in a written contract will help you remember what was agreed to.”

Hiring an attorney is a smart business decision because many business owners do not properly understand complex legal terms, also known as legalese, and that’s how costly mistakes happen. Copying a contract from the internet can cause you to agree to things you didn’t know you were agreeing to. An experienced lawyer will make clients aware and thoroughly explain all the terms that should be included, anticipate a spectrum of issues that may arise between the parties, and help with negotiations. Your business will be at a huge disadvantage if the other side has an attorney and you do not.

2. Misclassifying Employees

Oftentimes, business owners misclassify employees as independent contractors when in fact they are employees and should be issued a W-2, rather than a 1099. By doing so, the business owner is exposing his/her business to possible tax consequences and penalties with the IRS, as well as claims for unpaid overtime, which can result in severe financial penalties.

Zachariah Evangelista references one example of a business he once worked with who did not pay an employee $400 worth of overtime. It wound up costing the client $30,000 in a settlement!

This is a prime example of why businesses need an attorney from the get-go to avoid such financial losses. The lawyer will evaluate the scope of the work a new employee is hired to perform and classify him/her accordingly.

3. Not Owning Your Intellectual Property (IP)

In your personal life, you are very cautious and protective of your social security number, so treat your business’ ID with just as much protection. When starting a business, get a Federally Registered Trademark for your company’s name and logo.

Without trademarking, you do not own your brand, the rights to your logo, or the rights to your name. If the day comes that you want to sell your business, the value of the business will be that much higher if its name is protected. And please note, registering a name as a “doing business as (DBA)” is NOT legally sufficient to protect a trademark.

Ser & Associates helps businesses register a trademark for an affordable flat fee. Please contact us today at 305.222.7282. Visit www.Ser-Associates.com for more information and follow us on Instagram, Facebook, and/or LinkedIn.

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