How To Avoid Common Business Legal Mistakes

Most businesses will make legal mistakes from time to time.  Many will be minor; others can be potentially devastating.  No one can be expected to know all the legal risks, but there are certain recurring legal concerns with which a business owner should be familiar.  Following are some of the most frequent legal errors made by businesses, along with suggested solutions:

1. Lack of Solid Business Agreements

Solution

Have written agreements with those you do business with, thoroughly defining the relationship and the rights and obligations of each of the parties.  Also have carefully prepared purchase order and invoice forms.

Comment

All agreements should be in writing; otherwise, they are much more open to dispute and sometimes will not be enforceable at all.  Good purchase order and invoice forms will put a company in the strongest possible legal position in the event of a payment or other disagreement with a customer.

2. Inadequate Employee Documents.

Solution

Maintain high-quality employee manuals and related documents (e.g., employment applications, offer letters, employment agreements, and termination certificates).

Comment

Properly drafted employment documents are important to substantiate the at-will status of an employee and to promote compliance with employment laws.  This is an area in which there are significant liability risks for an employer—including expensive employee disputes, wrongful termination lawsuits, and governmental penalties.  Employment documents need to be updated regularly to address changes in the law.

3. Failure to Protect Intellectual Property (IP)

Solution

Insist that employees, contractors, and anyone else given access to confidential information sign a nondisclosure agreement.  Consider registering patents, copyrights, and trademarks (e.g., with the U.S. Patent and Trademark Office or the U.S. Copyright Office), as registration is necessary to gain maximum protection.  Use proper notices to declare patent, copyright, and trademark rights to the world.  Establish procedures to safeguard trade secrets.

Comment

Much of the value of a company can reside in its IP.  The failure to protect that IP can be very damaging, eliminating a company’s hard-earned competitive edge.  A company also may need to be concerned about liability for disclosure of IP of a third party that the company is bound to hold in confidence.

4. Absence of Key Legal Provisions on Website.

Solution

Your website should include appropriate disclaimers and a discussion of proprietary rights.  You may want to register your website with the U.S. Copyright Office.  A detailed “terms and conditions” section on the site also may be advisable.  If your website collects information from California customers, California law generally requires that it include a privacy policy with specified information.

Comment

It is good practice to have your website reviewed by a legal professional to insure you are in compliance with legal requirements and protected against legal risks.

Continued: Part 2