Small Business Legal Issues


Running a small business can be a legal mine field, and without
appropriate knowledge and understanding of the relevant risks
involved, you can quickly find yourself in some difficulties.
Running a business without consideration for the law can be
dangerous, particularly when considering the potential financial
and even criminal risks you may be running. That’s why it’s a
good idea to have an idea of the relevant legal provisions that
may apply to particular circumstances in order to understand
where you might be personally liable, and how you can avoid
incurring such liability when managing a small business.

The first thing to bear in mind is that a business has its own
legal formalities relating to the particular business form you
choose. For example, running your business as a sole trader will
require very little in the way of natural legal formalities,
other than that you file appropriate tax returns annually and
keep appropriate records of your financial transactions on a
daily basis. This burden is far stricter if you choose to
operate as a limited company. If you do decide to go down this
route, it may be worth investing in a book on basic company law
for reference. Don’t take the risk and try to muddle through;
it’s better to know what is expected of you and what the
penalties are by getting some form of expert opinion.

Secondly, you may face liability if you cause injury, either
financially or physically to another party in the course of
running your business. It is advisable therefore to opt for
decent insurance coverage to protect against eventualities of
this nature. Another good idea is to include an exemption clause
or disclaimer whenever you can, although it’s important to
understand these are not watertight. What they can do is limit
your liability in damage to physical property where it is
reasonable to do so, and in no way can they limit any liability
you may have for anything deemed unreasonable or anything
relating to a physical injury or death.

It’s a criminal offense as a business director to trade when
you are aware that your business is insolvent. This is a general
rule, and there are obviously intricacies involved, still this
must be protected against. You could receive a criminal record
if you breach these laws so take expert advice at an early stage
if you face financial difficulties.

Similarly it is a criminal offense not to take records of your
finances and to hold on to those records for three years. You
are open to inspection of those records by the relevant
authorities as and when they have a need to examine your
business dealings. This is also compounded by legal requirements
under the VAT regime, where you will be required to keep more
rigorous accounts and are with almost certainty, likely to be
subjected to periodical inspections.

There are a number of key legal provisions you should be aware
of as a small business owner, and they are far too numerous to
list here. Rather than spending fortunes on legal advice
regarding simple matters, a better option is to purchase a
beginners’ guide to company law. This will give you a quick
insight into the practical requirements of running your business
on a day to day basis and you can top up your knowledge bank
with legal advice as and when required.