5 Tips to Prevent Legal Trouble When Operating a Small Business

5 Tips to Prevent Legal Trouble When Operating a Small Business
The Siliconreview
22 January, 2021

Small business owners often focus so much on their operations and the competition that they forget about an equally significant factor — the law. It’s easy getting on a collision course with local, state, and federal authorities if you launch yourself into the market without regard to the set legal guidelines. All new business owners are advised to seek the guidance of a corporate expert before starting operations unless they are experts themselves. If your business is already up and running, we have compiled below a few useful tips to help you identify and eliminate potential illegalities.

1. Learn the law

A business with expansion plans is bound to encounter new legal hurdles with every step it makes, and that may mean constantly checking with a corporate lawyer for advice or representation in court. You don’t want law enforcement officers knocking on your door every now and then. Familiarize yourself with the relevant laws that govern business operations in your state. When you are well acquainted with the corporate law, you are not only less likely to overstep your legal bounds, but also more protected from unfair harassment from rival firms and authorities.

2. Create written client contracts

Competitors are not the only business enemies you have. Once in a while, you will find yourself on the receiving end of a legal tussle with a client. These cases often arise from misunderstandings when signing deals.

With written contracts, this confusion is unlikely to happen, and even if you are hit with a lawsuit, defending yourself will be a lot easier. Word-of-mouth agreements can only work if you are certain your client is a trustworthy person who won’t try to pull a fast one on you later. Otherwise, you need a comprehensive contract detailing what your company does, your responsibilities on a project, and what is done when things don’t go according to plan.

3. Beware of trademarks

Trademark infringement occurs when a company uses a name, domain name, logo, or any other branding element associated with another business without permission. It is a big issue that could result in time-consuming and costly lawsuits from competitors. Worse yet, it could lead to a loss of branding rights, forcing you to start from scratch. You can avoid this by ensuring all your branding elements, from your business name to the logo, are not related to that of an existing company in or outside your niche.

4. Have a privacy policy

Virtually all countries have laws requiring businesses to handle sensitive customer data in a particular way. Your business should not only have a strong cybersecurity strategy to ensure customer and employee data is safe from data breaches but also be open about the data you collect from your users and how you intend to use it. Customers should be made to agree to your privacy policy before any data is collected from them and used in any way.

With that being said, as a responsible business owner, you should work to keep to a minimum the amount of personal customer data you collect. The more sensitive data you keep in your database, the more attractive your business appears to hackers. What’s more, customers are more likely to do business with a company that doesn’t prompt them to reveal sensitive information about themselves.

5. Avoid litigation

Litigation should always be a last resort whenever you face insurance compensation claims or any other legal issues that can be settled outside court. Personal injury claims at work, for instance, should be investigated properly and sorted without any sideshows if it’s obvious the injury occurred while the worker was performing an activity within the scope of their employment. Court processes are incredibly drawn-out, and you might be required to pay the employee’s legal fees on top of the settlement if you are eventually found guilty.

6. Prepare independent contractor agreements

It has become a trend for small businesses to hire independent contractors instead of employees for certain services in a bid to keep operating costs low and save themselves the supervision burden. If you want to go down this route, make a point of preparing written contracts, defining the relationship between your business and these contractors.


Once you start running a small business, the world becomes complicated. You have a lot of decisions to make, and legal inconveniences may be a hindrance. Running a small business successfully requires you to pay attention to the law and brace up for legal battles. Use these tips to protect your business from legal trouble and all the disruptions that come with it.