5 Ways to Prevent Legal Problems When Opening a Business

by Suzanne Kearns

4 min read

The last thing a new business owner wants to deal with is legal problems. If you’re planning to open a business, here are five things you can do to prevent troublesome legal issues from popping up.

1. Research the Business Name

When selecting your business name, it’s important to ensure it does not infringe on someone else’s trademark or cause domain name issues. To avoid these legal problems, you will need to thoroughly research your intended name before settling on it. Here are some steps you can take.

  • Search for the name on the internet to determine if there are other companies already using it.
  • Conduct a trademark search at the U.S. Patent and Trademark Office to make sure someone hasn’t already registered a similar mark.
  • Conduct a search at the Secretary of State office in the state where you intend to set up your business (and other states to which you might expand) to find out if someone is already using the business name.
  • Search domain name registrars to ensure that the business name isn’t already taken by a .com or other commercial domain name.

2. Create a Standard Contract

If you sell services to consumers or other businesses, you should have a standard contract that protects your business in the event of a dispute. If you have a business lawyer, have that person draw it up. If not, you can search FindLaw’s list of sample contracts by industry, and use that as a starting point for your own. Here’s some of the information you’ll need to include:

  • An explanation of pricing, payment time tables, and what financial repercussions the customer faces in case of late payment.
  • Limitations on your business’ liability if the product or service doesn’t meet customer expectations.
  • A clause that relieves you from breach if uncontrollable events occur.
  • A clause about how any disputes between you and the customer will be resolved.

3. Create Terms of Use and Privacy Policies for Your Website

You will also need to have some legal protection in place for your company website, which you can accomplish that by creating a sound terms of use agreement and privacy policy. The terms of use agreement sets out the terms and conditions that people must adhere to to use your site, and the privacy policy informs visitors what you will do with their information once they visit your site. Here are the basics that should be included in both.

A terms of use agreement should:

  • Instruct the user how your site can be used and, if applicable, place limits on that use.
  • Limit the liability for you, your employees, affiliates, officers, and directors.
  • Set forth how disputes are to be settled.
  • Give indemnification to the site owner
  • State your policies about refunds and returns
  • Inform the visitor that your site’s content, graphics, design are protected by copyright laws.

You can use this free sample copy, and revise it to fit your specific needs.

A good privacy policy will:

  • Tell the visitor what information the site collects, how it uses that information, and how (or if) it might be shared or sold to third parties.
  • Disclose how cookies and other similar technologies are used.
  • Tell the visitor how you intend to protect the information you collect from them.

You can create a basic Privacy Policy for free at iubenda.

4. Understand Your Tax Obligations

Depending on how you set up your business, you will be responsible for various types of taxes. Some of the taxes you could incur are:

  • Federal income taxes: The Small Business Administration (SBA) offers a comprehensive guide to help determine what your obligations are.
  • Corporate taxes: Refer to the IRS’ page about corporate taxes.
  • State income taxes: See the SBA’s list of obligations by state.
  • Payroll taxes: The IRS offers an employer’s tax guide that covers this topic in-depth.
  • Self-employment taxes: Here is a comprehensive guide to these taxes.
  • Sales tax: Use this list to find your State Department of Revenue and ask what your state’s requirements are.

5. Protect Your Intellectual Property

If your product or service is unique, you’ll need to take steps to protect it. Some of those steps include:

  • If you have developed a new and unique product, you can apply for a patent, which will prohibit others from using, selling, or making the product as described in your patent claim. In addition, if you have a developed a trademark (like a logo) associated with your business, you should register it. To apply for a patent or register a trademark, contact the U.S. Patent and Trademark Office.
  • If you have developed a creative work, such as a book, movie, music, software, or advertising copy, copyrighting that work is optional, but if your work is registered, it will be easier to prove that it’s yours should an infringement occur. To register it, contact the U.S. Copyright office.
  • If you have employees, you should ask them to sign a confidentiality and assignment agreement. It will require that employees keep your proprietary information secret, even after they leave your employment, and it will also ensure that any inventions, products, services, or ideas they develop while employed by you belong to your company.

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