How To Avoid Getting Sued When Starting A Small Business

Small Business, Businessman, small business lawsuitThis is a guest post by Jenna Smith. You can click here for more information on submitting guest posts.

If youíre an entrepreneur starting a new small business, you likely have a long list of issues and challenges that take up your time.

For example, youíre going to need to hired qualified talent, raise capital, and try to determine an appropriate marketing mix for your product.

You also may be busy making budgets, working with web developers, and scouting out retail space.

Although your business may feasibly grow someday to encompass numerous departments and specializations, for now you are its finance, IT, marketing, and accounting departments all rolled into one.

It may also be smart for you to take on the duties of a legal department at this time.

After all, a business that does not establish itself on a strong legal footing is far more susceptible to lawsuits in the early going Ė and any lost lawsuit would probably be enough to quash a small startup before it even has a chance.

On a similar note it is highly advantageous for the sake of future growth to have solid legal safeguards in place, even if you never end up getting sued.

Here are the key steps to prevent your small business from getting sued:

Ensure that your products and services do not violate any patents or copyrights

The most important step is to first determine whether your businessí products are legally unique. This requires you to consult patent databases thoroughly in both your country of manufacture and in anyplace with patent agreements or where your product might sell. Consult a lawyer if there is any ambiguity.

Ensure that your designs, logos, and company name donít violate any trademarks

On a similar note, itís crucial that you progress no further in establishing your small business until you know whether the name and logo you choose are unique and freely available. While many small businesses can fly under the radar with an illegal name, as soon as you start a website or begin to grow youíre liable to run into problems.

Remove yourself from liability

If you are the sole proprietor of your small business, it may be convenient to forgo incorporation and draw no distinction between your personal and professional assets. But, without incorporation, a lawsuit against your business can target your personal resources. Similarly, someone who sues you for unrelated reasons could make your business pay if they emerge victorious.

Write clearly-worded contracts

Even in the early going it is essential that contracts are clear and comprehensive. Otherwise you could incur investor lawsuits because they were not given a stake in the company. You could also be sued by disgruntled employees who got hurt on the job or who were laid abruptly. Ultimately, it is always beneficial to explicitly state every possibility and eventuality in a contract.

Donít poach your talent

Many small businesses have found it easy to hire most of their new employees from one specific firm. All too often this results in lawsuits, as the firm accuses these employees of colluding with each other and quitting to form a competitor. With this in mind, try to diversify the sources from which you draw talent.

These are some of the main legal tips to keep in mind when starting a small business. If you have any questions about this advice or cannot comfortably follow through on your own, find a phone number of a nearby lawyer and give him a call. Itís always better to be safe than sorry.


Jenna SmithJenna Smith lives in St. Louis, Missouri.†When she isn’t writing, usually about law or business, you can find her cruising the paths in Forrest Park on her bicycle.


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Photo credit: Microsoft Office Online




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