6 Legal Challenges that Business Owners May Face

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Legal Challenges that Business Owners May Face

Legal challenges can make you uneasy when it comes to running a fast-growing business.

Owning a business is a great way to gain personal and professional freedom and reach your financial goals faster. But as a business owner, you also have many responsibilities that an employee never has to worry about. 

To grow a business, you need to learn about fields you may not have had any connection to before, such as taxation, United States labor laws, copyright laws, bookkeeping, marketing, and leadership.

In this article, we’ll focus on the legal challenges that business owners may face and how to overcome them, especially if your business is located in Los Angeles. 

1. Business Setup  

Choosing the correct legal structure for your business is essential because this decision will determine your rights, responsibilities, and tax liability. 

You can set up a business as an LLC (limited liability company), sole proprietorship, limited partnership, or corporation. Because the corporate form affects tax liability, entrepreneurs who don’t set up their business correctly from the very beginning are at risk of facing legal consequences in the long run. 

If you think you have made an unfortunate choice and your business would benefit from another tax plan, research your options. You can usually change the legal status when deemed necessary.

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Continuing your operations in the United States with the wrong business structure can lead to a cascade of troubles, which will reflect on your finances. If you don’t know what business structure to choose, contact a reliable attorney near you for advice. 

2. Accounting and Tax 

Filing your tax form in time can help you avoid legal challenges

As a business owner, it’s crucial to set aside a generous percentage of your revenue for taxes. Facing tax issues is not only unpleasant, but it can have disastrous financial consequences, especially for an emerging business. It’s one of the most serious money-draining legal challenges business owners battles with.

Any tax payment delay will lead to penalties and interest. The IRS uses many more or less aggressive tax collection methods to ensure every business entity and individual fulfills their tax duty. Incurring tax debt can be the end of a business, regardless of how much potential the business has. 

Overdue taxes, missing records, wrongly categorized expenses, and wrong deductions can have legal and financial repercussions. If you’re facing problems with the IRS or state tax agencies, contact tax resolution experts to clarify your tax situation. They can negotiate with the IRS on your behalf, so you won’t risk losing your business or personal assets. 

3. Trademarks, Patents, and Copyrights 

Legal battles can be avoided when there is no copyright violation

Depending on your industry, copyrights, trademarks, and patents can present a serious legal challenge. When choosing the name of your business and products, research registered trademarks to ensure you’re not infringing on someone else’s rights unknowingly. Even honest mistakes can have repercussions. Then you also have to worry about patents in case you’re developing new products. Patent owners will not hesitate to take you to court because they know they can win lots of money easily.

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Another important thing to consider is that the Internet has opened the path to many violations of copyright rules. People share photos, videos, and articles disregarding the copyright owners and rarely face legal consequences. 

The legal challenges that come as a result of using copyright images can be totally avoided when you start creating your own custom business logos and photos with free online graphic tools.

However, the law is not as merciful with companies and small businesses. So, if you use visual or written content in your social media campaigns or newsletters, avoid plagiarizing or copying foreign material or media, or you may receive an angry cease and desist letter. 

4. Data Privacy and Protection 

If your business addresses consumers from the European Union market, another factor that can cause legal challenges is data privacy and protection. Collecting private data from EU consumers must strictly respect EU regulations. Businesses that fail to protect the personal data of their customers face legal consequences and hefty fines. An example of good practice is to let the visitors of your website and your newsletter subscribers know which data you collect and how you collect it. 

Why data protection and privacy can help you avoid legal challenges

Although wading through these legal issues can be daunting, you don’t want to put your business at risk of being sued by a dissatisfied customer who has had their financial or personal information hacked. Data privacy has become a major issue in recent years, considering the growing number of cyberattacks. Investing in sound cybersecurity and data encryption is an effective way to avoid potential legal battles.

5. Partner Agreements 

If you’re a solo entrepreneur, you don’t have to worry about partner agreements. However, if one or several people are joining you in your entrepreneurial journey, a partnership agreement helps clarify everyone’s role, responsibilities, and rights. Even if you start a business with your life partner, a family member, or a friend, having a partnership agreement can help immensely from a legal and practical perspective. 

Your partnership agreement should include answers to many important questions relevant to daily business operations and not only. What happens in case of a conflict between partners? Or when a partner fails to comply with the rules? What share does each partner receive if the business is sold? Who has decision-making power? Lawsuits against business partners are incredibly common and very costly to a business. 

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6. Health and Safety 

Workplace injuries often cause legal nightmares to business owners. If a job involves physical work and the use of heavy equipment and tools, businesses are legally and morally obligated to follow strict health and safety guidelines. Employees injured at work will sue the company to demand compensation. And if the injury has life-altering consequences, the compensation must cover long-term care and medical treatment. 

As a business owner, workplace safety and health should be a top concern. Penalize employees who disobey safety rules because they are not only endangering themselves and their coworkers, but they’re also putting your business at risk. Create a personalized health and safety policy that fits the conditions of your line of work, and offer safety training, especially to new employees. An injured employee can drag your business into a years-long legal battle, so do not take this aspect lightly. 

Are You Facing These Legal Challenges in Your Business?

Use the tips above to protect your business from legal and financial troubles. In increasingly competitive markets, anything that affects your revenue and reputation will have long-lasting negative effects. By making sure your business is compliant with all the laws and regulations, you can grow your business with peace of mind.

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