Take time to make sure your business is legally sound.
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Since many laws take effect at the beginning of a new year, unsurprisingly, that's when friends and family approach me for legal advice.
I don't mind. For me, these issues are well-worn paths. Helping to guide my friends or family through them brings me satisfaction. I also put my own businesses through various legal checkups throughout the year.
Getting your legal house in order isn't much fun, but then again, neither is getting sued. So while you're following up on your resolutions to exercise more and eat better, give yourself a legal gut-check, too.
Here are seven legal issues to get straight in 2019:
1. The right corporate form.
Is your business set up as a partnership, LLC, sole proprietorship, or limited partnership? If you haven't given this issue much thought, now is the time. It'll make doing your 2018 taxes a lot easier. You might be able to switch your structure to take advantage of the new tax plan.
2. Agreements with employees.
The early days of a business are often very informal. You might have agreements on the back of a napkin. If your business is growing, it might be time to reassess or renegotiate.
I can't tell you how many times I've spoken with startup founders who hired employees or even engaged co-founders without any agreement. This can be problematic if those relationships end in fights over rights or ownership in the company.
Without having had clear agreements regarding rights, responsibilities, scope and what to do if the relationship goes south, it can end up turning into a dispute that could have been avoided.
3. Terms of purchase.
Similarly, when your business is small, it might be okay to skim over your terms of purchase or sale, but as you get larger, there's more to lose. These agreements can be simple and attached to an invoice.
For years my firm ZentLaw has counseled clients of various sizes that have not had terms of purchase with their vendors and it has resulted in business challenges for them later down the road.
While it is very common for small businesses to not have any process regarding who can issue a PO or request services from a vendor, lacking such processes can place the business at risk for fraud, self-dealing and embezzlement as the company grows.
To protect your company, it is important to have a definite process and written agreements in place with vendors and consultants.
4. Protect your name.
You've spent a lot of time, money and energy building your brand. Now, if you haven't done so already, make sure it's protected. That means getting a trademark and ensuring that your website domain name isn't taken or is up to date.
Even today, I see companies that did not check domain names or trademarks before starting their business.
Having been in the domain name business for years, since the 1990s, domains are definitely more top of mind for me than they might be for most people. But even if you haven't spent time in the domain name business, you should always be thinking about your domain name first for your company.
5. Protect your trade secrets.
Usually, companies don't think about protecting their trade secrets until they realize that they never protected anything. Protect what's important to your business, whether it's intellectual property or other IP like trade secrets.
You don't have to be a tech firm to have trade secrets. You might run a bakery and have a super-secret formula for cupcakes. Guard it just like Coca-Cola guards its formula.
6. Examine your property agreements.
If you're growing quickly, it may be time to look for a new office. But beware of signing multi-year agreements for commercial property; I've seen a lot of startups fall into this trap.
If your company goes south, you're still on the hook for payment and the debtors will come after you personally. You also might want to consider downsizing to WeWork or other collaborative workspaces.
7. Look at how you collect data.
If you do business in Europe, you should be aware that the General Data Protection Regulation goes into effect in May. You need European consumers' go-ahead for using their data--otherwise, you could face fines as large as four percent of revenues.
It's also a good time to look at how you're collecting data from your U.S. customers too and ensure that you're not running afoul of FTC guidelines.
For most people, wading through these legal issues isn't the fun part of running a company. But these really are issues that you ignore at your peril.
While you're easing back into work in early 2019, take some time to make sure your business is legally sound.
Then spend the rest of the year growing it and making it better.
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