Nothing conveys the American Dream much more than owning your own business. To some, there’s nothing better than having the ability to call your own shots and be the head of a company or organization. However, it’s highly important to make sure you have all your ducks in a row from a legal standpoint to guard against potential legal issues down the road. Below, we discuss eight of the most common legal mistakes business owners make so you can steer clear of them.

legal mistakes

Legal Mistake #1: Forgetting to Establish the Business’ Legal Structure

The hustle and bustle of opening a business can distract business owners from the fact that they need to establish the proper legal structure for their companies (e.g., limited liability company, limited liability partnership, professional corporation, etc.). Making this legal mistake only sets business owners up for personal liability losses should legal issues occur in the future.

Legal Mistake #2: Failing to Get a Trademark, Copyright or Patent

It’s important for business owners to properly guard their intellectual property by obtaining a patent, copyright or trademark. Otherwise, someone else has free reign to take advantage of the intellectual property or product and exploit it for personal gain.

Legal Mistake #3: Forgetting the Shareholders’ Agreement

Without a shareholders’ agreement, you’re just asking for for things to unravel. These agreements serve as legal blueprints that lay out what to do when disputes or issues arise among shareholders. They also lay out what happens if or when a shareholder leaves the company, gets divorced or dies.

Legal Mistake #4: Not Establishing Human Resources Protocol

It’s not uncommon for small business owners to fail to provide human resources protocol, guidelines or handbooks for their teams to abide by. This opens them up to incurring losses from employee-filed lawsuits should legal disputes arise.

Legal Mistake #5: Drafting Contracts without Legal Experience

Contracts are binding legal documents that need to be handled with the utmost care and attention. It’s therefore highly important to seek the counsel of a reputable business attorney who has experience in business law when the time comes to draft a contract.

Legal Mistake #6: Bashing Competitors

In today’s social landscape, it’s becoming more and more common for people—even business owners—to actively trash-talk their competitors. While this isn’t inherently illegal, you cross into dangerous territory when you engage in libel and defamation. Our advice for avoiding this legal mistake is to tread lightly and perhaps stick to the rule of, “If you can’t say anything nice, don’t say anything at all.”

Legal Mistake #7: Failing to Remit Payroll Taxes and/or Sales Taxes

It is the law for businesses to pay payroll taxes, collect sales taxes and hand that money over to Uncle Sam. Failing to remit these funds to the government will most definitely cause your establishment to be shut down.

Legal Mistake #8: Taking Issues to Court Too Often

Taking a lawsuit to court is a long, expensive process that ends up costing both parties money they could have used for other, more pressing business matters. Our advice would be to try negotiating with the other party via mediation or some other form of alternative dispute resolution as opposed to seeking litigation.


Steer Clear of Common Legal Mistakes in the Business Setting

Keep in mind this list is by no means an all-inclusive list of all the possible legal mistakes business owners can make; just some of the most common. If you are a business owner or have the dream of opening your own business and would like some sound legal counsel from an experienced team of attorneys, the lawyers at Hayes, Berry, White & Vanzant are here to help! Feel free to contact our business lawyers here, or give us a call at (940) 387-3518.