Legal disputes can be time-consuming and costly, especially to small business owners who may not have the funds for adequate legal representation. The more you know about the common legal issues that businesses face, the more that you can do to avoid them and prepare yourself against them.
Being caught up in a legal issue can also have a negative effect on your business’s reputation, especially if it becomes publicised, so it’s imperative that you ensure that your business is all above board and that you take legal issues very seriously.
What are ethical and legal issues in business?
Legal issues in business will arise when you are not in line with certain laws. There are certain legal standards that you need to uphold as a business, which is all clearly outlined by governmental laws.
Ethical issues do not necessarily have a legal base. They are based on human ethics, values, and the concept of right and wrong. Ethical issues may arise in your business if you cut corners and do not treat your employees or customers with respect.
What are some of the most common legal issues in business, and how to avoid them?
While the legal issues that you’re most likely to face will depend on what industry you’re in, these are some of the most common legal issues facing the majority of businesses:
Not being registered
Any business in the UK needs to be officially registered with the HMRC. Otherwise, they could face big legal problems. It is a very easy process that can be done through their online portal and should be done as soon as possible.
Ensure that you decide whether registering as a sole trader, a partnership, or a limited company, suits your business ideals and objectives best, and register accordingly. Each structure has different legal implications, so make sure that you understand them fully.
Having employees is a serious commitment. You are responsible for people’s livelihoods, and there are a dozen hoops to jump through if you want to fire anyone. So be very careful about who you hire. Some common employee-related legal issues include:
- Employee classification- Ensure that your employee classifications (part-time, full-time, contractor) are accurate to prevent legal issues.
- Termination- It’s important to handle employee terminations very carefully. Wrongful terminations often end up in a lawsuit. You’ll need to draft a notice of termination, provide relevant reasons, and give the employee sufficient notice should you wish to terminate their employment with you.
- Discrimination- Unfortunately, discrimination and nepotism in the workplace are very common. Discrimination allegations are most often based on race, gender, age and ethnicity. Ensure that all of your employees are treated equally and are provided with equal opportunities.
- Electronic Security- There should be a BYOD policy implemented for any employees who do company work on their own devices. This is so that your network is protected.
- Confidential Information- If you host meetings with employees in which you share confidential company information, make sure that you get them to sign confidentiality agreements to avoid potential issues.
- Health & Safety- Whatever industry you’re in, you should prioritise sticking to the relevant health and safety guidelines set out for your line of work. To be completely above board, your business will need to draw up its own health and safety policy.
- Foreign Workers- While you should not discriminate against foreign workers, you need to check that they have the necessary work visas before you consider employing them.
A common mistake that many new businesses make is not properly protecting their intellectual property. If you do not effectively employ the use of patents and trademarks, you may have to experience another business stealing your ideas and patenting them for themselves.
Alternatively, if you don’t check the patents and trademarks on ideas and imagery that your business is using, you may find that another business believes that they have ownership over them, and a legal battle could ensue.
Legal disputes over intellectual property can often be very complex and take years to resolve! Equip yourself with sufficient knowledge about intellectual property to avoid being dragged into a costly and lengthy legal battle.
Disagreements between shareholders
Starting a business with a family member or friend may seem like a good idea, but as the business grows, there are many issues that you’re likely to face. Because of the familiarity, there are many instances in which an official shareholders’ agreement (which states the objectives, official shares, as well as the rights and responsibilities of each shareholder) is often just never created, and when misunderstandings and disagreements arise, it can turn into a nasty legal battle.
No matter who you start a business with (if anyone), ensure an official shareholders’ agreement is in place.
Disrespecting the competition
This is something that you need to be exceptionally careful of. While it can seem somewhat ‘normal’ to trash talk your competition, social media and the internet give a platform for which trash talk can be documented and recorded for all to see…. and be used as proof in legal battles if your competition ever wants to sue you for defamation. Be careful what you say about your competition and who you say it to. Something relatively innocent could be taken completely out of context and be used to make you look like the villain.
The safest bet would just be treating your competition with respect, staying out of any drama, and ensuring that your employees do the same.
Prioritising being legally sound
If you want to prevent legal issues and prioritise being a legally sound company, your best bet would be to seek the advice and guidance of an official legal services provider. They’ll be able to assess your business model and point out any potential issues. Once you find a lawyer that you can trust, you’ll have the peace of mind that you can always call on them and trust their judgement in the case of emergencies.
In the case of legal issues, prevention is always better than cure.