Legal fees, if paid at the right time, can be an investment, not an expense.
An all too frequent event in a business mentor’s life is when a client wants to discuss a problem that could have been avoided, or at least the cost and impact of it greatly reduced, if they were better prepared from a legal point of view.
Some recent issues clients have raised include: terminating underperforming employees who are permanently employed; disputes with customers for non-payment of invoices due to vague contractual arrangements; lease renewals; agency disputes; IP theft by employees; and joint venture partners, to name a few. All have two things in common: they can cost a business money they had not budgeted for and can be a distraction from running the business (another cost).
Here are some key points to consider so you don’t make these costly mistakes.
1. Why should you care about the legal aspects of your business?
All too often, business owners don’t want to think about the legal aspects of their business. There are several reasons for this: they think it’s all too hard, too complicated or they are too busy in their business to be able to work on their business.
As a business owner, you must have a fundamental understanding of all aspects of your business. The buck stops with you and you can’t blame other people because you didn’t understand something. While the law may seem scary and complicated, taking the time to understand a few basics will greatly assist your business.
2. Put the right foundations in place
As with all areas of your business, you need to think about setting it up correctly from a legal point of view. This is critical to its continued success. To do this correctly, think about what you are doing and where you are going. Your goals will determine the way your business should be set up, as there are different options for different goals. This involves considering the structure you operate the business through and what agreements you are going to have with your suppliers. Having this basic understanding will give you much greater insight into your business and what you need to do to make it successful.
3. Hiring employees
Starting this process correctly is critical to the ultimate success of your business. When it is time to bring on employees, you need to get the fundamentals of the process right from the beginning. It can be tempting for a business owner to say they are bringing on an employee to free up their time. This often means they neglect to ensure the right steps in the hiring process are taken. Remember, good contracts make great relationships. By making sure you have proper employment contracts and workplace policies in place, you set your expectations for the employee correctly.
4. Estate planning
Another area you probably don’t want to think about is your estate planning. This is understandable, as it is human nature not to want to think about what will happen when you die. But if you have a business and a family, it is crucial you put together a plan for your estate in case something happens to you. The rules relating to what happens to your assets if you don’t have a will vary in different states. It’s your legacy, so you want to have control of where it goes. If you have been putting off your estate planning process and are running a successful business, you need to take those steps straight away to protect your assets.
5. Agreements with clients/customers
Where you provide goods or services to customers or clients, it is critical you document that arrangement properly. When a business is just starting, it is easy to skip this vital step as you want to get in and start working with the client. That may be great for a month, a year or many years, but if the relationship sours for any reason and you don’t have a contract that sets out your understanding of the relationship, then it may be difficult to enforce what you think the contract will be. You should always have a contract in place to protect yourself and your business.
Not every business has the same potential legal issues, but getting clear on what yours might be will save you a lot of angst in the future.
I have teamed up with Jeremy Streten from Business Legal Lifecycle to offer my readers the opportunity to take the Business Legal Lifecycle test for free (usually $95.00). This test will help you uncover the legal blind spots in your business. If you wish to take up this special offer, please visit:
- A clear understanding of important legal terms.
- An idea of where your business is in the Business Legal Lifecycle.
- A plan for the future.
Jeremy Streten is an Australian lawyer and author of the Amazon best-seller The Business Legal Lifecycle (businesslegallifecycle.com), a guidebook that helps business owners understand what they are doing in their business from a legal perspective and gives them a plan for the future. Jeremy can be contacted at firstname.lastname@example.org.