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Errors for small business owners to be cautious of

On Behalf of | Mar 18, 2015 | Closely Held Businesses |

Ohio individuals who are considering starting a small business should try to avoid a few legal pitfalls. One is failing to make sure that there is not already a trademark on the name they have in mind for a business or product, as this can lead to a lawsuit.

Another error is failing to separate business and personal matters. Two things need to be done to ensure this separation. One is creating the business as a separate legal entity. Consultants, independent contractors and other one-person businesses with no storefront may think that this is not necessary, but in 2013, more than 40 percent of small businesses were the target of a threatened or actual civil lawsuit. Even if a business is successfully sued, if it is a separate legal entity, the owner’s personal assets will not be vulnerable.

The business also needs to be a separate financial entity. This means opening a separate bank account that the owner does not use for any personal matters.

Finally, business owners with employees should make sure that they classify those employees correctly. Business owners must understand the regulations that guide whether an individual is an employee or independent contractor. A misclassified employee or independent contractor may be able to fire back with a lawsuit if they feel they are mistreated or unfairly fired by a company.

Individuals who are considering starting a small business may want to speak with an attorney. Not all small business owners are also knowledgable about entrepreneurial law, so the attorney may be able to provide some guidance regarding what kind of paperwork needs to be filed, what protections are needed, what tax laws must be observed and other information. Even if the entire business consists of one individual working from a home office, it is important to ensure that all regulations are followed.

Source: National Federation of Independent Business, “Lazy Legal Mistakes Your Small Business Should Avoid,” Clare Curley, Jan. 10, 2015


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