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5 Kinds of Legal Trouble You Need To Look Out for if You’re a Business Owner

— August 18, 2022

Unlike other types of legal issues, which typically involve your customers, employees or competition, licensing agreements involve government entities.

All businesses come with risk factors, including ones related to the law. As a business owner, you must either be well-versed in the law as it relates to your business or hire a legal expert to assist you. Here are five kinds of legal trouble you need to look out for if you’re a business owner.

1. Data Breaches

No matter what tools you use to manage your data, whether they’re internal ones such as subscription management software or customer-facing ones such as eCommerce platforms, that data is inherently at risk of being breached. Not only can data breaches put your customers’ information and money at risk, but they can also put you at risk of legal action. This is why business owners and their IT teams must place appropriate protections and security tools in place to safeguard data. It’s also why insurance coverage specifically for cybersecurity is becoming more common.

2. Employee-related Legal Issues

Whether you employ one person or own a large corporation, you need to be aware of legal protections for employees and contract workers. Most people are aware of worker’s compensation meant to support employees in the event of an injury or illness, but there are other common legal situations that can cause legal issues for employers. They include overtime disputes, employee misclassification and minimum wage compliance. Make sure you’re aware of federal and state labor laws and are able to comply with them.

3. Litigation and Lawsuits

Everyone wants to avoid lawsuits, but sometimes it’s impossible to do so. Do what you can to ensure you’re as unlikely to be sued as possible and be prepared to deal with one if you ever are. Make sure you either have a lawyer on your staff or on retainer to help you through a lawsuit and any associated litigation. Try not to rush into any litigation, as it can become expensive. Instead, look for ways to negotiate and settle out of court if that option is possible.

4. Licensing Agreement Issues

Unlike other types of legal issues, which typically involve your customers, employees or competition, licensing agreements involve government entities. To run a business in any given jurisdiction, you must comply with that jurisdiction’s business licensing requirements. Failure to do so typically results in penalties such as fines and fees. You may need to consult with a lawyer regarding federal and state licensing laws, but licensing is primarily handled at the local level. You’re typically required to pay a fee to receive a license and to renew that license periodically. In some jurisdictions, there may be additional requirements to receive a license.

5. Intellectual Property Protection

This illustration is an allegory of the battle between the old world of corporate monopolies and post-internet public domain for the extension of intellectual property rights. Image by Christopher Dombres, via, public domain.
Image by Christopher Dombres, via, public domain.

Disputes over intellectual property (IP) are relatively common. You may experience legal issues regarding IP for a number of reasons, including companies using registered trademarks that are extremely similar, avoiding paying licensing fees for utilizing copyrighted material and patent disputes. These legal problems can result in lawsuits and demands for the user to compensate the owner of the IP. Always be aware of the IP your company uses and make sure your company has proper permission to do so. You should also keep an eye on any IP you own and whether people are attempting to use your IP without permission.

Legal trouble can come from internal issues or external factors. It may be something your business is culpable for or something that happens to you and your business. Whatever the reason, you must be prepared for any legal trouble that may come your way. Understand the common legal issues faced by businesses like yours and develop a plan to deal with them in case they happen to you.

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