Five Legal Tips for Business Owners and Startups

People operating businesses or startups probably have so much on their plate that they don’t spend much time worrying about the legal issues they may face.

It would be wise to familiarize yourself with some of the common legal issues that small business owners are occasionally faced with.

The Most Common Legal Issues Small Business Owners Face

1. Employment Discrimination: Several laws prohibit employment discrimination, and discrimination lawsuits can be very costly. It is important to have strict anti-discrimination policies in place at your business and ensure they are strictly enforced. There should be a zero-tolerance policy regarding harassment and discrimination by any of your employees.
2. Wage and Hour Disputes: It is required by law that all employees are paid at least the minimum wage. Failure to comply with the minimum wage can lead to lawsuits by employees, in which they may be able to collect back pay and other compensations.
3. Accommodation of Disabilities: Under the Americans with Disabilities Act, employers are required to make “reasonable accommodations” for employees with physical disabilities. For example, if an employee can only work from home due to limited mobility, then the employer must provide reasonable accommodations. However, this is contingent upon the type of position and nature of occupation. Failure to comply may lead to costly lawsuits.
4. Employees vs. Independent Contractors: Some employers will simply label their employees as independent contractors for the tax benefits, but then treat them as employees for all practical purposes. Such misclassification of employees can have serious legal consequences for employers.
5. Intellectual Property Disputes: All businesses hinge on intellectual property to conduct commerce. For example forms and client sheets may be considered intellectual property worth a great amount of money for the business. You need to consider how to protect this from competitors and sometimes even your own staff.

Startup vs Small Business

A startup is a company in the early phases of its development, known for its innovative business model and potential for quick expansion. Often technology-driven, it encourages high levels of creativity and innovation. On the other hand, a small business is usually operated by its owner. They adhere to a more conventional business model, concentrating on offering products or services to a particular local market.

Business Model

Startups aiming to disrupt the industry frequently look to alter the current situation. They emphasize creating new technologies or products that can be rapidly expanded. Conversely, small businesses usually stick to a more conventional business model, focusing on delivering products or services to a particular local market.

Growth Potential

Startups typically have a greater capacity for growth compared to small businesses. They often concentrate on creating a product or service that can be expanded rapidly and has substantial market opportunities. Conversely, small businesses generally have restricted growth potential, focusing on a specific local market.

Legal Structure

Startups and small businesses can have different legal structures. To protect liability and attract funding, startups are frequently organized as corporations or LLCs. In contrast, small businesses are commonly organized as sole proprietorships or partnerships.

Taxes

Startups and small businesses should also consider taxes. Startups might qualify for tax incentives or credits to promote expansion and progress. While small businesses might have a simpler tax framework as they concentrate on a particular local market.

Team Size

The number of team members in startups is usually smaller than that in small businesses. Startups tend to concentrate on creating innovative technologies or products, necessitating a compact group of highly proficient personnel. Conversely, small companies generally employ a larger workforce to deliver products or services to a local market.

Time to Profitability

Startups take longer to become profitable than small businesses because they are dedicated to developing new technologies or products, which may require longer to bring to market and expand. In contrast, small businesses generally achieve profitability more quickly because they concentrate on a specific local market and can generate revenue rapidly.

Do not hesitate to contact KAASS LAW if you have questions about California Startup or Small Business laws or discuss your case confidentially with one of our experienced attorneys.