Protecting your Business from Legal Trouble | The LINC Up Series

Legal protection is essential for businesses of all sizes. Investing in legal guidance reduces the headache of trying to operate out of your own expertise and knowing that you’re probably missing the mark. Legal consultation will safeguard your assets, reduce liability, ensure compliance, and help you make informed business decisions saving you time, money, and emotional distress. 

1. Choosing a Business Structure 

When you’re starting out, it’s important to choose the business structure that best suits your unique organization. Your business structure will impact everything from day-to-day operations to taxes and liability. It’s important to choose a structure that is suited to the number of decision-makers and investors involved with your business. Making an informed choice about your business structure will ensure the best mix of legal protections and benefits. 

2. Compliance is Key

Regulatory compliance is critically important, but unfortunately complex. Failure to complete a simple one-page form you weren’t even aware of can put your business at risk. You may be a new business owner and not know that you are required to file a franchise tax report with a Texas Comptroller every year. While, yes, it’s a tax function, it also has legal implications when not filed. It's a single-page form and easy to complete, but if you don't file it, the state can revoke your business entity, leaving you as a sole proprietorship with no protection from liability. In order to safeguard your business, be sure to:

• Ask your CPA to screen for compliance issues
• Invite your attorney to assess compliance
• Check that your documents are up to date and everything is in good order

3. Contracts Matter

The consequences of not having a written agreement for a business can be significant. Businesses can fold and friendships can be ruined in their absence. Two or more parties may assume they are on the same page, but a life change such as a death or divorce illuminates the inadequacies of the existing written agreement if one even exists.

Forms that are available online can be a good starting point but may fail to take into account the users’ life stage, circumstances, or the nuances of a business’s specific transaction. A well-written agreement will detail what will occur in the event of default, death, or divorce and prevent a great deal of financial and emotional turmoil for the involved parties. 

4. Maintaining Your Business Documents  

It’s essential to maintain your business documents by reviewing and updating them often. Life is busy and it’s easy to neglect documents, leaving you vulnerable. A business partner may decide to leave the business for a new venture, but you fail to finalize the change with appropriate documents. A year later, you’re looking to take out a business loan, but the previous partner is still showing up as an owner. This is not the time you want to have to track that individual down and hope they’ll sign something releasing their interest. Their recollection of the transaction may have changed, they could have changed their mind, or it may just be difficult to locate the individual. These normal parts of owning a business can be made easier by being diligent about keeping documents current.

5. Drafting Documents 

It can be tempting to Google various forms to meet your needs, even from a reliable source like the Supreme Court of Texas or the Texas Real Estate Commission. The problem is not what is on these forms, but what is missing from them. Without the discerning eye of a legal expert, it’s difficult to know whether the form is comprehensive. Documents may be lacking the necessary provisions and can leave businesses in a vulnerable position. Have an attorney draft or review your legal documents to help protect your business from:

• Expensive legal fees 
• Time and energy spent trying to resolve an issue that could have been prevented
• Lost income from high-level business members being tied up in litigation 

6. Why You Need A Lawyer 

A lawyer is a partner to your business whose primary objective is to protect you and offer valuable knowledge. While you’re busy running your business, a lawyer can offer support in areas where you lack expertise. A lawyer can help you avoid costly mistakes and save you a load of headache. Hiring a lawyer provides valuable legal protection and allows you to focus on what you do best.