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Legal Considerations Small-Business Owners Need to Keep in Mind

When you’re starting a business or working on building one, there are lots of different jobs to juggle, from sales and marketing processes to finance, administration, human resources tasks and more. However, if you want to ensure that your venture is around for the long term, you must not forget to think about the legal responsibilities and safeguards involved in running a business. Read on for some of the top considerations all small-business owners need to keep in mind.

Business Structure

One of the first things you need to think about when preparing to launch or buy your business, is what type of ownership structure you will use. For example, will you operate it as a solopreneur venture, as a partnership, or a company? If you plan to share ownership, then it is vital that you have legal documents in place to safeguard yourself and your business, and to ensure things are set up in the best way.

If you are going into business with partners, consider putting a partnership agreement in place, even if it is with family members or close friends. These agreements are important as they help to cover all the parties involved. Things can change over time, after all, so you should have a legal document that details the specifics of the agreement.

The document can set out things like the ownership percentage of each person; what responsibilities each person has (e.g., working full time or part time, looking after particular areas within the organization); and what will happen if one partner’s circumstances change and they need to sell their share or they pass away. It can also list details on how employees will be hired or let go; how individual partners can spend money within the business, and how much of it; and what will happen if disagreements occur.

If your business has lots of different owners, you should draw up a shareholder agreement. This document works similarly to a partnership agreement, and details how key decisions will be made; the level of ownership and involvement of each of the shareholders; and how and when people can exit the company. It can also lay out the protections and responsibilities of the various shareholders, the voting rights of each party and how capital will be raised in the future.

Hiring and Managing Staff Members

Human resources is another area where entrepreneurs need to be very clear about legalities and their responsibilities. For starters, there are numerous regulations involved in how you can go about hiring staff members. For example, when you create job advertisements to advertise roles, you must ensure that you steer clear of any type of discriminatory language. This covers many areas, including discrimination based on sex, color, race, age, disability, religion, and national origin.

You must also be careful about not hiring in a discriminatory way that at first glance seems neutral, but that really excludes particular groups. For instance, if you mention in ads that you are looking for “energetic” applications or “seeking new graduates,” this can actually be a red flag that you are in effect discriminating against older candidates.

In addition, unless you have a legal reason why you need to ask job applicants for particular personal information about themselves when they apply for a job, you should always steer clear of requesting intimate details. For example, you generally can’t ask people to give you information about their marital or family status, date of birth, or religious affiliations.

Once you have chosen the people you want to hire, you must also follow the laws about how you pay them and the paperwork you lodge. Each position needs to be classified, for instance, as “Non-exempt” or “Exempt,” as this determines if they will be covered by the Fair Labor Standards Act (FLSA) or not, and things like whether they will be paid on an hourly basis, receive overtime, need to be given specific meal breaks, the minimum wage they can earn, and more.  

You also need to complete and lodge a variety of necessary forms when you hire employees. This list can vary, but includes things like the I-9 Form (used to verify the identity and authorization for employment of people), which must be lodged within three days of a new staff member’s start date; and the W-4 withholding tax form, which affects how much tax needs to be withheld from every pay check. It needs to be completed before the first payment is made.

Safety in the Workplace

There are also many legal considerations to take into account when it comes to keeping your team safe in the workplace. You need to do everything you can to ensure that offices, warehouses, work vehicles, and other places of work are kept hazard free.

You need to keep equipment and vehicles regularly maintained, and dispose of things which could pose a safety risk. Any hazardous materials need to be properly used, stored or moved; workspaces should be kept clean and tidy so that people don’t slip, trip, fall over, or have things fall on them; and first-aid kits must be kept on every premise. People must also use the necessary safety equipment when completing potentially hazardous work.

If incidents occur where workers are hurt, you must kept records of the events. Note down who is injured, and where and when this happens. Take accounts of the injured parties and any witnesses, as well as the injuries incurred, what the environmental conditions were like at the time, and the events leading up to the incident. If your employee decides to contact a workplace injury attorney for representation over a claim, these details will likely be required.


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