What Legal Issues Do Small Businesses Face - Finderorg
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by admin - Jul 24, 2022

What Legal Issues Do Small Businesses Face

The world becomes far more convoluted as you enter the business realm. Legal hassles could be unavoidable because of the many unusual problems and choices you'll have to make. Even while legal difficulties affect every organization, many small enterprises put other concerns ahead of legal ones. For several reasons, a small firm could run into legal trouble. Employment contracts that spell out each party's rights and responsibilities are crucial in today's litigious climate.

Establishing the proper legal framework for a small business and acquiring the appropriate licences are both critical steps that, if skipped, could result in heavy penalties or even the closure of the enterprise
Small businesses, in particular, can't afford to be careless with their intellectual property. Copyright, trademark, or patent protection is essential for successful businesses because of the value of original products, services, marketing strategies, etc., in attracting and retaining customers.

Common Legal Issues That Small Businesses Face

Here are ten potential small business legal issues that can create problems if they are not managed correctly early in the life of a small business.

1. Incorrect Statements of Tax

Tax preparation is challenging for most individuals, but it may be considerably more challenging for small businesses. The incorrect selection of a business structure or the attempt to handle financial matters on one's own without the assistance of a professional accountant can lead to this result.

Before you establish your firm, it is a good idea to do some research on what your tax requirements will be. It is a simple method to reduce the risk. You need to ensure that you include the cost of taxes as a liability in the budget for your company. Employing a taxation attorney's services will greatly assist you when it comes time to file your taxes and will help guarantee that everything is in proper order.

2. Customers Who are Dissatisfied With their Experiences

The satisfaction of your clients and consumers will have a significant impact on the growth of your company. Nevertheless, it is unavoidable that there will be some dissatisfied individuals, which could result from a misunderstanding or an error.

The challenge here is maintaining control of the situation so it does not spiral out of control. Dealing with it as soon as possible and attempting to maintain client satisfaction by providing alternatives can be pretty productive. However, there is still a possibility that some clients will find it disappointing. There is a possibility that a dissatisfied client would post negative comments about your company online, where they will be visible to other prospective clients. On the other hand, if you believe that these reviews are fake, you may be entitled to pursue legal action to have them removed.

On the other hand, if a client chooses to take legal action against you by filing a lawsuit, you will need to seek the advice of an attorney. A litigator is an attorney specializing in this field and has experience. In addition, obtaining the appropriate insurance will shield you from liability if clients sustain injuries while visiting your place of business.

3. Licences

Before you are allowed to engage in business in the majority of vocations legally, you are needed first to obtain a licence. The most frequent licences that proprietors of businesses must obtain include those on real estate, liquor, and buildings. It is to ensure that you have been adequately instructed in the industry's laws and are familiar with operating the essential equipment.

If you are not sure if you need licencing, you must check. Having the licence is also an excellent selling factor, and if you are caught engaging in business without the appropriate authorization, you could face significant fines.

4. Trademarks

Another unexpectedly prevalent legal problem that small businesses have is one involving trademarks. Be careful to conduct a significant amount of study before deciding what to call your company, rebranding it, or introducing new products or services. If you can think of a name, there is always the possibility that someone else has already thought of it, and it is entirely feasible that the other company already has the trademark for the name. Even if it was unintentional, infringing another person's trademark can get you into much trouble with the law. It is not the type of predicament in which you want to find yourself.

5. Employment

Under Australian law, a company is considered a small business category if it has fewer than 20 employees. It is easy to give in to the temptation of hiring personnel without following proper procedures, but doing so can cause troubles in the long run. You should still go through the normal hiring process even if a Modern Award protects your employees. You can do this by utilizing an employment contract, which will specify the terms of employment, the expected behaviour of employees, and the grounds for termination.

In addition, having the appropriate policies for the workplace will enable you to describe the procedures that are followed in the office articulately. It is usually wise to have documents that cover these topics, as legal concerns might develop for small businesses regarding an employee's usage of social media, behaviour, or even if your staff smoke while on the job.

6. The Rights of Intellectual Property

Continuously, people and companies invent novel concepts and pioneer cutting-edge technological advancements. Somebody from New South Wales and Western Australia may independently develop the same original concept at different periods. Both parties have never had any contact with another. Therefore, neither could know whether or not the idea has been tried before. Because of this, it has evolved into one of the most widespread legal challenges.

Before beginning operations, it is essential to conduct a thorough search to ensure that concepts such as the name of your firm, its logo, and its slogan have not already been taken. It is possible to search the internet to determine what trademarks have been registered. If another product is comparable to or identical to the one you had in mind, you risk getting into legal trouble for infringing on a trademark. The takeaway from this should be that you should register your company's trademarks as soon as possible because their value to your company will only increase as it expands.

7. Selecting an Appropriate Organizational Structure

It can be hard to determine what business structure will work best for you and your company. Whether an exclusive proprietorship, partnership, corporation or trust, each comes with its responsibilities regarding taxes and the law.
Like most other things, your company's conditions are subject to change. It is normal for people to start their firms as sole traders and then transition to other business forms when the company expands in size. Being a sole trader allows you to manage your business how you see fit, but it also means that you are responsible for meeting your company's financial and legal requirements.

When a sole proprietorship begins to generate significant revenue, the proprietor must pay taxes on their personal and corporate profits. On the other hand, companies are not responsible for their debts because they are regarded as a different entity from their directors. In addition to this benefit, companies typically have to pay taxes at a more favourable rate. If your company is expanding, you must evaluate your current business structure and consider how useful it is to your company.

8. Raising Capital

Successfully scaling your firm to meet its goals and fulfil its mission requires you to raise cash successfully. Before beginning the process, you should ensure that you have a solid foundational grasp of its components. Each step in the function corresponds to a distinct phase in the expansion of your company.

When you are trying to grow finance for your business, knowing what paperwork is required, what mistakes you need to avoid, and where you should begin can be challenging. It is also a good idea at this time to consult with a Capital Raising Lawyer so that you can be sure that everything is in proper order.

9. Skipping Insurance

Insurance for your company can shield it from legal action, just like legally binding contracts and organizational structures can. Every company should have general liability insurance, but depending on the company's nature, it may also be necessary to have auto insurance, product liability insurance, worker's compensation insurance, and other types of coverage. It will ensure that you do not fail your company due to liability claims, storm damage, or other unanticipated events.

Suppose you do not consider yourself an expert in business law, including tax, intellectual property, and contract law. It is wise to take the suggestion of an attorney who concentrates their practise in these areas. A lawyer can assist you through the complexities of the United States tax laws, select the optimal business structure for your company, and design contracts with the appropriate language to preserve your company's assets.

The cost of litigation can rapidly and efficiently bring an entire company to its knees. The right time to hire an attorney is very long before you need to defend yourself in a court of law, and you should do so as early as possible in starting your business. An expert business lawyer knows all the ins and outs of establishing the proper structure for a company and safeguarding its assets.

10. Establishing an Online Presence

The process of establishing an online presence begins with the registration of a domain name. However, to register a domain with an ending of.com.au,.au, or.org.au, the business must first have an Australian Business Number (ABN) or an Australian Company Number (ACN). In addition, your company must guarantee that its payment gateways are safe and protect its customers' sensitive information. When you operate a website, you are responsible for ensuring that it complies with all applicable consumer, intellectual property, and privacy laws. The following are the essential documents:

1. The Terms and Conditions of the Website

2. Privacy Policy

Moreover, you will want to investigate the many methods through which you can safeguard your intellectual property online. The content of a website is protected by copyright. Still, registering a trademark to ensure your company's logo and the name is also a brilliant idea if someone else uses them without your permission.


When beginning your own company, you will need to give a lot of thought to the legal implications of your decisions. It is critical to take care of these issues as soon as possible since, if left unattended, they can become more challenging and expensive to address. The good news is that taking care of these issues at a low cost is feasible while simultaneously implementing the appropriate preventative steps to safeguard your company.


1. How Come So Many Startup Companies Fail?

Common causes of business failure include insufficient money to get started, lousy management, a flawed business plan, or poor marketing strategies.

2. Are small Enterprises Still Struggling?


3. To What Extent is Poor Management to Blame for the Demise of So Many Startup Companies?

The most typical reasons for the failure of the small business are a lack of money or finance, inadequate management team, poor infrastructure or business strategy, and poor marketing campaigns.

4. What are Some Legal Considerations?

When something occurs that could lead to legal complications; it is called a legal issue.

5. What Kinds of Legal Services are Most Frequently Required?

The other two most common reasons people require an attorney are to resolve family law matters and to get legal help after experiencing personal harm.

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