10 Common Legal Mistakes To Avoid

10 Common Legal Mistakes To Avoid – Running a business is hard. It’s even harder when you’re doing something wrong, and the consequences are costly. As a small business owner, you’ll need to understand the extent of liability concerns fully.

A seemingly simple and benign action may give rise to a lawsuit that could cost your business dearly. Protect your business and yourself by reading on!

Avoiding these ten common legal mistakes:

1. Not Forming a Business as an LLC or Corporation

Many small businesses start as sole proprietorships or partnerships. But, these legal structures can pose severe risks if your business grows beyond these limits. In particular, they don’t provide much protection from personal liability if someone sues your company for damages.

In addition, they don’t offer any protection if you decide to sell part or all of your business someday down the road.

Forming an LLC — a limited liability company — is one way to protect yourself from personal liability if something goes wrong. You’ll also get extra tax benefits and the ability to raise capital from outside investors more quickly than most sole proprietorships and partnerships can (if your state allows this).

2. Failing to Draft a Will

One of the first steps in estate planning is drafting a will. It is a legal document that establishes how your property will be divided after you die. A will also allow you to appoint your representative to oversee the distribution of your assets according to your wishes.

If you don’t have a will, state law determines how your assets are distributed. In some states, spouses inherit everything; in others, spouses may inherit only half. A choice is essential if you don’t want to leave everything to your spouse.

3. Performing Work Without a Written Contract

It’s easy for small businesses to think they don’t need contracts for services. Because they don’t expect payment from their clients or customers. However, without a warrant, both parties have little recourse if something goes wrong. Such as one party failing to deliver their end of the agreement or not paying what they owe under the contract terms.

A written contract protects both parties by putting everything in writing. So, there are no misunderstandings and no surprises later on down the road when things go wrong.

4. Executing a Will Without Witnessing

A will is a document that allows you to dictate how your assets are distributed after you die. If you leave behind children or other dependents, you should have your will witnessed to ensure they receive their share of the estate.

A choice must be seen by two adults who are not beneficiaries of the will. This ensures that someone independent of the testator (the person creating the will) and their family members knows what is written in it and can confirm its validity if necessary.

5. Not Purchasing Adequate Insurance Coverage

Insurance policies cover specific losses, such as property damage or medical expenses. Not purchasing enough insurance coverage can lead to financial hardship if an accident occurs or an illness goes untreated due to a lack of funds available for treatment.

In addition, insufficient insurance coverage could lead to criminal charges if injuries occur while driving without proper auto insurance coverage.

6. Failing to Keep Copies of Documents or Receipts

The first mistake people make when starting a business is not keeping copies of important documents and receipts. This can be costly if you lose an essential document or receipt. You may only be able to prove you have ownership of a particular product or property if you have proof that it belongs to you.

7. Failing to Read Important Documents

Another mistake people often need to correct is reading essential documents, such as contracts and legal agreements, before signing them. It is necessary to read all documents carefully before signing them because they could contain hidden clauses or stipulations that may harm your business.

For example, some contracts may require you to pay extra fees for using certain products or services offered by the company with whom you signed the contract. You’ll need to read these contracts carefully to avoid costing your business more than expected.

8. Failing to Seek Legal Advice When Appropriate

Many people think there is still time to seek legal advice when they need it. This is not true. Even if you have already been sued or charged with a crime, you should still consult an attorney before deciding how to proceed. Many things can be done to improve your situation, but only if you act quickly.

9. Not Registering Your Business Name or Trademark and Thus Losing Your Rights to the Name

If your business has a unique name or logo, there is a good chance that someone else will also try to use it. And if they use it first, they may be able to claim ownership of it and prevent you from using it in the future.

To avoid this problem, you should register your business name as soon as possible. Sell products or services under a particular title or trademark.

You should also make sure that no one else is using that same Name for their own company (or similar Name) by searching for registered trademarks online.

10 Common Legal Mistakes To Avoid – Wrapping Up

You have a new business and are on your way to creating something great. You’ve got the smarts, but do you have the legal know-how to guard yourself against potential mistakes? The best way to avoid these mistakes is to be aware of them and take necessary action. Now is the time to learn from someone else’s experience.