How do small businesses avoid some of the legal risks that can come to haunt them in future?
With over 32 million small businesses in the US, who between them employ almost half the country’s private work force, the need for a good understanding of how to avoid legal risks is of paramount concern.
What IS a ‘Small’ Business?
The definition of a small business varies considerably. In the US most small businesses employ fewer than 500 employees, while in the European Union a small business is regarded as one with fewer than 50 employees.
In Australia, companies with fewer than 15 employees are considered small businesses.
Nevertheless, even in the US, there are about 38 million businesses with fewer than 100 employees and so the statistics vary greatly.
Small Business Risks
Small business owners often have their hands full between marketing their services and building rock-solid customer relationships. Their priority is to grow their businesses, develop marketing and management plans and other requirements necessary to build their businesses.
However the time required for managing business operations with the many and varied requirements and demands often means entrepreneurs can fail to identify legal compliance issues necessary to ensure their businesses comply with an array of legal requirements ranging from tax issues to marketing and product safety issues. The result can be major and expensive legal issues. They tend to take a plethora of risks, from neglecting web accessibility to potential patent theft to relying on verbal agreements while negotiating with clients.
Unfortunately, even minor legal mistakes could be catastrophic to small businesses, which may not have the resources to fight legal battles. Besides causing financial losses, it could affect their reputation and cause them to cease operations.
There are a daunting array of legal risks encompassing both civil liability issues and even criminal risk.
Common Legal Risks and The Role of Lawyers
As a lawyer, you must understand that managing small business clients is different from handling established, large corporations. For instance, many small businesses and startups clearly cannot afford in-house legal counsel. They may also be working with both employees and clients across the globe, which further complicates their legal liability issues.
Here are some of the legal risks you should watch out for and avoid for your small business clients.
Failing to Protect Intellectual Property
Small business owners and employees rack their brains to develop innovative products and marketing campaigns. Also, they work hard to design a unique brand identity comprising a business logo, website, and other visual elements.
But they’re so caught up with the ideation and execution that they overlook the importance of protecting their assets from IP theft. That, in turn, could take a toll on their branding and even result in counterfeit products.
As a lawyer, you have to take stock of your client’s IP assets and help them obtain the necessary copyright, patent, or trademark protection. Also, you need to ensure that your client’s assets aren’t infringing or violating any copyrights held by another brand.
You could even advise your clients to seek help from DMCA (Digital Millennium Copyright Act) takedown services to avoid copyright infringement of their digital assets.
Not Maintaining a Paper Trail of Client Service Terms
Small businesses often rely on verbal agreements to negotiate payment and service terms with clients. That approach works fine until there’s a dispute, and the client refuses to pay or decides to file a lawsuit. While verbal agreements are legally enforceable, presenting them as evidence in court can be tricky.
Instead, it’s wiser to have your clients use written, legally binding contracts while negotiating service terms. It ensures that you have a paper trail to refer to in the event of a legal dispute. Small businesses can also use cutting-edge online tools, such as vcita, that help them send service estimates to clients and collect payments from them. You can even use tools like vcita to obtain e-signatures confirming that a service estimate has been approved by the client, along with all of the fine print on the estimate.
Using a solution like this can help small businesses digitize their paper trail, thus minimizing disruption to their workflow while protecting them from legal risks.
Ignoring Employee Documentation
If you’ve worked with small business clients, you know that their employment structure and recruitment processes can be tricky. Many small businesses hire remote employees from different countries and once again there are potential legal risks that arise. The business owner may not have a clear understanding of the minimum wages and benefits employees are entitled to in different countries.
Also, they don’t always obtain the necessary documentation or use written contracts while hiring an employee. It puts them at risk of being sued if an employee is wrongfully terminated or suffers a workplace injury.
Similarly, small businesses often prefer to recruit freelancers or independent contractors instead of full-time employees. Unless they have a formal contract outlining the terms of employment, it could put them at risk of employee misclassification.
An experienced business lawyer can help avoid these risks by ensuring that they obtain the necessary documentation for every employee. Also, they should make sure each employee signs a contract outlining their rights, responsibilities, benefits, and other terms.
There may also be a need to add a non-disclosure or non-compete clause to protect your client’s trade secrets and other confidential assets. If they’re hiring overseas, make sure they don’t violate any employment laws or tax codes in those countries.
Violating Web Accessibility Laws
In recent years, there’s been a significant rise in the number of web accessibility lawsuits. Irrespective of the type of products/services a small business offers, it’s crucial that their digital assets, such as websites and mobile apps, are accessible to people with disabilities.
Failing to comply with laws, such as the ADA (Americans with Disabilities Act), can result in hefty fines. Also, it could damage your client’s reputation and result in loss of business.
That emphasizes the need to familiarize your small business clients with web accessibility laws and guidelines. Also, you can recommend the use of tools like Deque to help your clients improve web accessibility.
In Conclusion
Small businesses don’t have the clout or resources to fight expensive and time-consuming legal battles. That makes it crucial for their attorneys to help them identify and mitigate various risks. From maintaining employee documentation to keeping a paper trail of service terms – there’s a lot you can do to protect your small businesses from legal hassles.
