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Five Legal Issues Small Businesses Commonly Face

by Karl Pearson • March 25, 2021

Small Business Owner

Starting a small business is an amazing feat and worth celebrating. However, you must protect your business legally by making the right decisions from the beginning. Even small mistakes can lead to costly legal proceedings that hurt your business’s bottom line. As a business owner, it is important to protect your business from the threat of business litigation. Here are five legal issues that small business owners like yourself commonly face.

Breach of Contract Disputes

When you enter into a business contract, you are required to meet your contractual obligations in accordance with the terms of the agreement. By failing to do so, the other party could sue you for breach of contract. There are many reasons why a breach of contract can occur, including failing to perform on time, failing to perform in accordance with the terms of the agreement or failing to perform at all. Depending on the severity of the breach, you could owe financial compensation to the other party. This is why it is important to have clearly and carefully written contracts drafted by a small business lawyer. A legal professional can help you avoid later misunderstandings and complications that could impact your business’s future.

Partnership and Shareholder Disputes

A certain level of conflict is inevitable in any partnership or corporation. You can often resolve partnership or shareholder disputes without taking legal action. A well-written operating agreement can help avoid disagreements.  However, some disagreements involve matters that directly affect the continued operation of the business. In these circumstances, you will need the help of a business and commercial litigation attorney to help you avoid expensive and prolonged litigation. The following partnership or shareholder disputes may require litigation or formal dispute resolution.
  • Breach of shareholder or operating agreements
  • Breach of fiduciary duty claims
  • Breach of confidentiality
  • Trade secret violations
  • Improper withholding of monetary distributions
  • Demands for dissolution
  • Conflict of interest allegations
  • And more!

Accusations of Wrongful Termination or Discrimination

As a small business owner, you have the difficult task of hiring the right employees for your business. You also have the difficult task of firing any employees that cannot meet the demands of the job or are affecting the morale of your team. You should adopt clear policies and procedures that employees can easily understand.  A well-written employee handbook can help your business avoid claims of wrongful termination and harassment.

Collecting Bills

Small business owners love their customers. Unfortunately, some customers do not always pay their bills on time.  You probably make a practice of following up with slow-paying customers so they understand your expectations.  But sometimes a customer can use a reminder from an attorney.  To the extent a demand letter does not work, it may be necessary to file a lawsuit to collect the unpaid bill.  We can help your business collect what you are owed.

Underpayment of Taxes

Many small business owners are not aware of the applicable tax laws for their particular business. The penalties for underpayment of taxes and non-payment are steep, so it is important to comply with federal, state and local tax requirements from the beginning. Common reasons for the underpayment of taxes include:
  • Poor record-keeping
  • Lack of understanding about the tax code
  • Business and employee misclassification
  • And more!
A small business attorney will give you the tools and information you need to prevent any trouble with the tax agencies. He or she can help you organize and structure your business operations to prevent common tax issues and avoid legal consequences for inadvertent noncompliance. Consult with a Scottsdale AZ law firm today for effective and professional guidance and support.

Avoid Legal Issues Small Businesses Face Everyday

Business litigation can be incredibly expensive and time-consuming. Many small business owners do not have the financial capital or energy to undergo a lengthy legal battle. It is important for you to obtain legal representation before the launch of your business. A business formation attorney knows how to correctly structure a business and will help you protect your assets. Contact Pearson Law, PLC today at (480) 820-1800 for help avoiding legal issues that small businesses routinely face. Attorney Karl Pearson will provide you with realistic expectations for your business and answer your most pressing questions during an initial consultation.

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