5 Legal Actions Every Small Business Should Take

As a small business owner, you already have a million things to think about: how to best serve your customers, who and when to hire, how to expand your reach, how to actually turn a profit. With so much on your plate, legal issues can often get pushed to the side. A lot of business owners adopt the, “better to ask forgiveness than permission” attitude, or they think that their luck will hold out a little longer without the need to address legal issues head-on. At Wakefield Law, we have been representing small businesses throughout Northern Virginia for 30 years. Guess what we’ve learned? There is no small business that avoids inevitable legal issues. And it’s not better to ask forgiveness than permission. In fact, that’s a risky and expensive approach to take. Why? Because legal issues always come up when you are dealing with transactions, whether they are with business partners, contractors, customers, or suppliers.

But don’t worry! There are a few simple, inexpensive legal steps that you can take now to protect your business in the future.

1. Get Clear on Your Business Entity Structure.

If you don’t yet have a formal business entity registered with the Commonwealth of Virginia, it’s time to get on it! Without a formal business structure, such as incorporation or the creation of a Limited Liability Company, you could be opening yourself up to a whole host of liability issues. If you have not yet taken the steps to create a formal entity, you are operating your business as a sole proprietor (or a general partnership, if you work with others). A sole proprietorship or general partnership are the easiest way to begin doing business, and they are perfectly legal structures. However, if something should go wrong in your business, someone gets injured on your property or using your products, or a contractor sues you for failure to pay a bill, or anything else that can happen in a business, you will be held personally responsible for these liabilities. That’s right, even your home, your personal assets, and your credit can be impacted by a professional liability if you don’t have a formal business entity to shield you. Once you have organized as a Corporation, Limited Liability Company, or other formal business structure, you place a shield between your business liabilities and your personal assets. When something goes wrong, only the business’ assets will be vulnerable. It’s a much stronger position to be in. And remember, if and when something goes wrong, it will be too late to create a formal entity, so it makes sense to go ahead and do it now.

2. Create the Rules of the Road.

Once you have formed your business, it’s time to create the rules of the road for its operation. As the owner and decision-maker of your business, you get to be in charge when it comes to laying down the law. In the business world, we call these guiding rules “bylaws.” Bylaws are not something that you are required to file with the Commonwealth, and so a lot of people don’t ever end up creating them. However, down the road, if and when a conflict arises between you, your partners and co-founders, or any other stakeholders, it is incredibly useful to have these internal governance rules mapped out in advance.

3. Draft a Contract that Works for You.

If you run a business, you need a contract. It’s that simple. Contracts set the expectations in any exchange of money for goods or services in a way that is binding and offers a pathway to resolution, should a conflict arise. Many small businesses we meet have been doing business on a “handshake basis” for years. Of course, there is something nostalgic and romantic about being able to do business with those you trust and without the burdens that paperwork can introduce. However, every single one of our clients has had this way of doing business come back to harm them. It’s not necessarily because the people they are doing business with end up being bad people. Often, conflicts in business simply arise because the priorities or expectations of one company or individual simply don’t align with those of another. A standard contract that protects your business interests can go a long way in helping to avoid or mitigate these conflicts. For a lot more detail on this subject, check out our blog post on what to include in a standard contract.

4. Have an Established Plan to Deal with Unpaid Invoices.

This is another example of the ways in which business can go wrong, even if we don’t expect it. It’s just a fact of doing business: sometimes customers fail to or refuse to pay their bills. You perform the work or provide the goods, send the invoice, and then -- no payment comes through. You follow up with a few friendly phone calls or emails, but you just don’t get paid. Although this phenomenon is common, it is not something that should be written off as the cost of doing business. Too many unpaid invoices can cause a major cash flow problem in any business. That’s why it’s important to have an established plan to deal with unpaid invoices. A clearly defined plan can allow your business to respond to and take action on unpaid invoices right away, and you can do so without disrupting your normal day-to-day business operations. An accounts receivable plan often includes setting a timeline during which your invoice is sent, follow ups are offered, and then action is taken to pursue unpaid debts. The exact way that this timeline is structured is completely up to you, but the burden of executing it doesn’t have to be all on you. That’s where an experienced team, like the collection attorneys at Wakefield Law, can make a huge difference.

5. Build a Team that You Can Trust.

Many businesses will do anything to avoid hiring an attorney. There is a view that hiring an attorney is prohibitively expensive and introduces hostility into a business when it’s not necessary. However, at Wakefield Law, we are a small business ourselves. We understand what goes into building a successful business and maintaining relationships with your customers over time. We are not in the business of disrupting the way you do business or the dynamic you have with your customers. Instead, we see ourselves as team members. Our job is to help you create the structures, protocols, and mechanisms that allow your business to run smoothly and profitably. Then, if something does go wrong, we work with you to resolve conflicts while minimizing lost time and funds.

If you are interested in learning more about how working with Wakefield Law can help improve the health and wellness of your business, give our office a call at 703-771-9740. As always, phone consultations are free of charge. We look forward to working with you!