Small Business Legal Issues

Small businesses face a number of legal issues that could range from simple issues with paperwork and filing tax deadlines to the liability with customers that could end in a courtroom battle. Understanding each issue and progressing from the start generally happens through the assistance and support of a lawyer.

Legal Rights

Many small business owners fail to establish the correct and appropriate legal structure of business within the company. This sometimes leads to bankruptcy or legal entanglements. Additional issues arise when outside investors are unable to discover the company. Without established legal rights and protections, the business owner may also encounter liability issues with customers and employees that could lead to the ruin of the company. Without the necessary legal rights, the owner may face personal liability issues with a lawsuit. Some owners may need to consider using a limited liability company, a corporation or engaging a partner.


Depending on the size of the small business, there are often shareholders that have an interest in the business. If one owner leaves or there is an opportunity to sell the company, these individuals have an agreement in guiding the actions of the company. However, it is still important to have a lawyer draft legal documentation to state how the shareholders will proceed and what happens if a partner, shareholder, or other owner dies or leaves the business. The interest must pass in an agreed upon manner to prevent conflict from stopping the company from accruing revenue.

Intellectual Property and the Small Business

Many owners of a small business may have issues with IP when the company uses unregistered software. It is possible to cause a conflict with another IP owner through the use of a trademark. If the company uses a similar or the same trademark as another entity in the same state, the owner may face litigation in the courtroom if he or she refuses to cease using the same symbol or word. The same type of lawsuit may happen if the company uses copyright material without paying for a license.

Then, the owner may press for compensation.

Other companies run into issues with patents and patent trolls. If the business uses products that come from a patent, the troll may issue a lawsuit against the owner for compensation that the business may pay to avoid the costly lawsuit. It is generally better to have a lawyer on hand to determine if the matter is a simple issue of paying for the patent problem or fighting out in the courts. No matter what the IP issue is, the company owner may need to consult a lawyer to understand the matter and to resolve the problem.

Competition with the Small Business

There are numerous legal complications and problems that may arise through competition with the small business. Some of these arise through market issues in the local area. Other legal problems arise through local city ordinances. A small business may need to check zoning rules to ensure that construction is possible. The competing practices must remain valid and not lie to the consumer as well as provide the truth about various ingredients, processes or tactics. Hiring employees could also raise another legal problem if some workers are underage or not able to work due to immigration status.

Litigation with Small Businesses

One of the more serious legal problems that arise for small businesses is the lawsuit. When an employee, customer or another party has an issue with the company, litigation is possible. These situations usually require the services of a lawyer to negotiate, settle or resolve. Seeking the advice of a lawyer on how to proceed and what to do is important. Generally, the owner of the company will have a lawyer on retainer if possible. This is necessary to provide support and assistance through many local and state problems. However, with litigation, the lawyer may need to prevent the case from progressing or negotiate a settlement with the other party. If litigation is inevitable, the lawyer will assist the business owner through the process and present the case to defend against the plaintiff.

Small Business Lawyer Help through Legal Problems

Whether the matter is a local, state or federal legal problem, a lawyer may assist the small business owner through the complication. He or she may provide paperwork, file documents, help with litigation and support the owner through various legal issues that could arise. The lawyer may also help prevent violations in the state.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.
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