Common Legal Precautions for Businesses

Starting a business is a difficult task. Outside of finding a location, buying supplies, and hiring employees, there are a number of legal precautions business owners must take. These precautions can help to keep a business running smoothly.

Legal Precautions for New Businesses

New business owners often have a slew of questions as to what legal measures to take before opening a business. Take a look at some of the items below to learn what to do in order to prevent legal trouble.

One of the first things a new business owner needs to do is pick a name for their business. The name should be entirely unique. This helps to avoid confusion between similar businesses. A new restaurant could never get away with naming themselves McDonald's. However, someone could call their hardware store Bob's Hardware, even though there are likely businesses that already have that name. Of course, if a business owner is going to do that, the business owner needs to make sure that no other businesses nearby have the same name.

Setting up employee payroll, also known as setting up a legal way to pay employees, is one of the most important things a business needs to do to avoid issues with the IRS. Firstly, the business needs a tax ID number and the business owner needs an EIN (Employer Identification Number). Each employee also needs an EIN. Eventually, employees will need to fill out the proper tax forms, including an I-9 and W-4. Without these forms, employees cannot be legally paid for their work.

Legal Precautions for Small Businesses

Once a business gets a bit larger, the business owner probably knows their way around some minor legal tasks. However, a business owner can easily run into new problems. Below are a couple of common legal issues to watch out for.

While false advertising may seem common, it is actually illegal to practice. For example, it is entirely legal to advertise a sale whether your business has a few things for 10 percent off or just a couple of things for 50 percent off. However, it is illegal to advertise a going-out-of-business sale if the business is not actually closing, or advertising something as being $10 if the business is really trying to sell it for $40. By avoiding false advertising, business owners can save themselves a world of trouble.

Taking out business insurance or buying health insurance for employees is not always required, but can prevent legal trouble later. This way, if employees are injured at work, it will be less likely that the business will face legal troubles-- this is because the business will already have a system set in place for when accidents happen.

Legal Precautions for Large Businesses

By the time a business becomes large, they have probably learned how to set up a business name and how to avoid false advertising. However, that doesn't mean that they can do no wrong. Below are some common legal troubles that large businesses might find themselves in.

Very large businesses, like Disney or Google, may find themselves running into antitrust charges now and again. Antitrust laws are used to prevent a business from monopolizing a product or service. This helps to keep the economy healthy and give other businesses the opportunity to grow. To avoid breaking antitrust laws, large companies should consult their lawyers before making corporate mergers.

Another white-collar crime a big business might run into includes fraud. Some examples of fraud a big business might run into including false internet sales, identity theft (stealing employee or customer personal information), or the less likely pyramid scheme. Any of these types of fraud and more can result in hefty legal fines and even jail time. For these reasons, it's best that business owners properly train their employees to avoid fraud at all times.

As long as business owners can keep these legal precautions in mind, he or she can prevent legal trouble in the future.