Legal tips small businesses should know
Protect your business from lawsuits.
By: Reeza Singson | Apr 12, 2012 11:00 am
Having written more than a year's worth of legal articles here, you should already have a good grasp of legal matters that affect you as a small business owner.
The following is a summary of sorts, a consolidated version of legal tips for small business owners like you.
1. Consider Incorporating
Remember that there are three ways you could put up a business: (1) Sole proprietorship, where you are the sole owner; (2) Partnership, you have one or more partners; (3) Corporation, you are merely one of many shareholders in your business.
While a sole proprietorship is the easiest to put up, it also exposes you to personal liability the most. This is because you are personally liable for your business debts and you have no one to share those debts with.
In partnership, the partners are also personally liable with their personal assets for the payment of the debts of their company, but at least they could split the amount among themselves.
On the other hand, in a corporation, because you are merely a shareholder and because corporations have legal personalities of their own, you are not personally liable for the debts and obligations of the corporation in case it is unable to pay its debts or if it is sued.
Another benefit of incorporating is it gives you a way to raise capital without exposing yourself to liability for loan obligations. By simply selling your stocks, you could raise capital for expansion or for any other worthwhile purpose.
2. Make your employees and suppliers sign ironclad confidentiality agreements
Next to keeping your industrial secrets to yourself, this is the best way to protect yourself against leaks or unwarranted disclosures of your company's secret ingredients, secret chemical formulas, and other industrial secrets.
In a confidentiality agreement, your employee or supplier promises to keep those secrets confidential, otherwise you could sue them for breach of contract and damages.
3. Insist on written agreements
Make sure that all agreements that you enter into with your clients, suppliers, and other persons involved in your business are rendered in writing.