Starting a small business is an exciting endeavor. This experience is likely a person’s dream finally coming true. His or her life savings are going into the business, and all of his or her time and effort goes towards starting and running the business. Because so much is on the line, it is vital that small business owners, like any business, take the time to understand employment law matters. Hiring people to work for you is major, as these individuals can help the business flourish. On the flip side, actions by employees could negatively impact a business, making it vital to consider potential employment law matters that could impact the business.
What are common employment law mistakes for small businesses? To begin, one mistake founders make is not putting everything in writing. This means outlining the roles and obligations and any aspects of the work relationship among owners. This includes detailing ownership percentages, salaries, removal grounds, governance and management, voting protocols and profit sharing. Another mistake is not implementing a buy-sell provision in case a founder seeks to leave the company. This provision can help prevent any disturbance to the course of business.
With regards to employees, common mistakes include not using adequate employment agreements that detail the employment relationship, failing to implement reasonable restrictive covenants and misclassifying workers. Some small businesses fail to implement and maintain adequate employment policies and procedures, which helps to identify potentially disruptive employment issues. Other mistakes small businesses makes include failing to protect intellectual property, failing to register with the applicable state commission, failing to pay employees on time or at all and failing to consult with an employment law attorney when employment issues arise.
No matter the issue, it is important to be realistic when it comes to addressing employment law matters. Although avoiding common mistakes can help reduce the chances of such legal matters, it will not prevent them from occurring at all. Thus, it is vital to understand what options you might have when it comes to resolving these issues and protecting your business.