If you are starting a small business, the last thing you want to do is end up in legal trouble. Here are three tips that will help you stay out of legal trouble as you start up and get your new small business going.
#1 Set Up A Partnership Agreement
If you are going into business with anyone else, such as family or friends, you need to set-up a formal partnership agreement. Do not rely on the strength of your relationship with your co-business owners as you set up your new business. It is important that you have a written agreement for many reasons. For example, if you were to have a falling out, having a partnership agreement would help you decide who gets what if you have to divide up your business. Or if one partner dies or if one partner wants to get bought out, your agreement would cover what would happen.
Your partnership agreement should also review and state how much ownership each has in the business. Finally, it should detail the energy and effort, both of time and money, that both of you put into the business.
Be sure that the partnership agreement protects everyone's interests.
#2 Set Up An Employment Agreement
Second, you need to set up an employment agreement with all new employees. This employment agreement should cover all of the rules as well as the expectations that you have for each employee. Additionally, it is vital that the employment agreement states that each employee's formal working status is described as "at will." This will provide you with the ability to fire an employee for any reason or for no reason at all.
#3 Set Up All Policies In Writing
Finally, make sure that all of your business procedures are set up in writing and are formally documented. For example, you are going to want to write out both your firing and hiring process for employees. You want to document how internal organizational decisions are made as well, such as what you do with proofs, how you pay expenses, and what you do with the income received. Having everything in writing will help you protect the interests of your small business.
Be sure to hire a small business attorney to work with you to set up all of the formal agreements and arrangements that you need to protect the investment you are making with your new small business.