Five Common Legal Mistakes

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					Five common legal mistakes
Everyone in business makes mistakes, but ignorance is not always bliss and you may face serious consequences if you don’t follow some of the basic rules of business… A little bit of research, planning and forward thinking could save your business a lot of money and hassle in the long term. Here then are the five most common legal mistakes that small businesses make: 1. Not documenting partners rights and responsibilities. With the excitement and all of the things to do, it is easy when starting a business to not clearly delineate who will do what. Yet that can be a big mistake. Just imagine what can happen when you think that you are in charge of day-today operations — and your partner thinks the same thing. Therefore, founding shareholders or partners should have a written agreement that addresses the following questions:
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How much time and effort is each person expected to contribute? Who will do what? How much capital will each person contribute? What happens if the business needs more capital? What happens if one person leaves the business? What happens if one person dies?

2. Ignorance of the law. An old legal maxim is, "Ignorance of the law is no excuse." And it's true. Not knowing your legal rights and responsibilities can get you into a heap of hot water. So, here is what you need to learn:
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Basic contract rules How to avoid being considered negligent How to protect your ideas and inventions via copyright, patent and trademark law Basic employer-employee regulations The governmental regulation of your industry

3. Not having written agreements. All of your important business agreements should be in writing for several reasons. First, oral agreements are difficult to enforce and sometimes not at all. More importantly, memories fade over time, people change their stories and people "remember" the agreement differently. Putting it in writing avoids these problems. 4. Starting the business as a partnership instead of a limited liability entity. Partners are jointly liable for all debts and obligations in general partnerships, as are sole proprietors for their businesses. If you start the business as one of those two kind of entities, and the business encounters a legal problem, your personal assets will be at risk. If instead of a sole proprietorship or partnership, you start the business as a corporation, LLC or limited partnership, you avoid that possibility and thereby you greatly reduce your risk. 5. Getting involved in litigation. Litigation fees can actually bankrupt you. Beware the lawsuit. If you don’t know the law around areas such as contracts, partnerships and your area of industry, which you are involved in and could incur a lawsuit then get legal advice. The same goes if you are unsure of any thing – consult your lawyer. Paying for legal advice at an early stage may save you money in the long run.


				
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posted:10/31/2007
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