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9 Common Legal Mistakes Small Business Owners Make (and How to Avoid Them)

9 Common Legal Mistakes Small Business Owners Make (and How to Avoid Them)

Why should your small business or startup work with a professional Portland attorney? To minimize risk!

New businesses don’t know what they don’t know, and even the most well-intentioned companies and startups may find themselves making a number of potentially serious legal mistakes. These mistakes not only expose a business to all types of legal disputes, they’re also expensive and time consuming. These issues can easily be the difference between a business struggling or growing and become successful.

Below are 9 of the most common legal mistakes made by small business owners in Portland.




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1. Choosing the wrong business entity

Small, one-person businesses often make the mistake of thinking they don’t need to form a corporation or LLC. While this may be true, it’s always important to make this decision carefully and with the help of an attorney.

For example, how you classify your business will affect your long-term business goals, including how easy it is to raise capital in the future, or even who you can legally solicit investments from.


2. Failing to trademark your brand

Even if you’re a one-man show, talking to a lawyer about trademarking your business name and logo is important. Most businesses spend thousands of dollars developing their brand. If you don’t have a trademark filed, someone can steal it from you or claim you stole it from them.

In addition to protecting intellectual property like your trademarked logo and name, you should also protect your trade secrets and other confidential or proprietary information. Work with your lawyer to determine what needs protecting and the legal measures you can take to do so.


3. Working with vendors without a contract

A handshake or verbal agreement is difficult to prove.

Your company’s interests should always be top of mind in business matters, and when it comes to working with a vendor or client, that means always having a contract. Although a verbal business agreement or handshake is enforceable in Oregon, it can be very difficult to prove and may not hold up in court. Never start a project or enter into an agreement without one.

A business lawyer can help you create some standard contracts you can adjust based on the situation and vendor. In the same vein, if your business is asked to sign a contract, you should run it by a lawyer before signing.


4. Using an insufficient employee agreement

Bringing on a team of employees – whether you have 5 workers or 50 – requires a thoughtful strategy, documented processes, and an airtight employee agreement.

Your employee agreement serves as the foundation for your employee-employer relationship. Without it, you’ll find yourself caught up in numerous labor and employment disputes.

A proper agreement should include, among other things:

  • Employment duration terms
  • Rights and restrictions upon termination
  • The employee’s classification
  • Company policies


5. Misclassifying workers

Do you know the difference between an employee vs independent contractor?

Worker classification is an area commonly misunderstood by employers. A worker’s classification refers to whether the individual is an employee or independent contractor, exempt or non-exempt.

Misclassifying an employee as an independent contractor (or an independent contractor as an employee) can result in serious liability. The list of harsh penalties is long, and includes wage repayment going back as far as three years!

As an employer, you must understand how to correctly classify your workers. To avoid legal pushback, this is something best discussed with an experienced lawyer.


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6. Not having an employee handbook

Many small businesses lack a formal employee handbook. This is a potentially dangerous mistake. Your employee handbook is meant to formalize the employee relationship by outlining company employment policies and procedures that align with federal and Oregon state employment laws.

There are hundreds of complex labor and employment laws, so ensuring compliance by having a legally sound employee handbook is imperative.


7. Handling disputes solo

Tackling legal issues on your own is one the worst mistakes you can make.

Many small business owners take the solo route in the misguided hope of saving money. However, this usually ends up costing much more in the long run. If you don’t know the ins and outs of business law, you can easily say something or take an action that jeopardizes the ability to address the issue in a strategic, cost-effective way.

Whether you have a dispute with an employee, business partner, or vendor, trying to handle the problem on your own can escalate the situation. Protect your company by working with a lawyer who can help you resolve the issue through negotiation, compromise, or if necessary, business litigation.


8. Misunderstanding copyright laws

Have you ever…

  • reposted someone else’s content on your website?
  • posted images you found online to your website?
  • used a random image you found online on your blog and credited the author?

If so, you may be guilty of stealing intellectual property and exposing your business to copyright violation fines. Or worse, legal action.

Due to certain exceptions or instances of fair use, understanding legal copyright laws can get confusing – but that won’t hold up as an excuse in the court of law.
As a business owner, it’s important to consult with an attorney to ensure your business is not guilty of copyright infringement.


9. Waiting to consult with a lawyer until it’s too late

Shield company from costly lawsuits and penalties.

All these (and more!) common small business mistakes could so easily be avoided by taking a proactive approach to your business.

Forming a relationship with a Portland business attorney is an investment in your company’s success. By keeping experienced legal counsel on your team, you’ll be able to expertly navigate any issues that arise and have a trusted source you can turn to with questions.

Otherwise, by the time you realize you’re dealing with a potentially disastrous legal situation, it may be too late.


Work with a business attorney you trust

At JJH Law, we specialize in the full spectrum of business litigation and labor & employment issues, delivering smart, creative solutions you can trust. Our clients appreciate our ability to focus on their challenges and goals while defending their interests.

Even if you’re still not sure your small business needs an attorney, our experienced lawyers are here to help. We work with new and small businesses throughout Portland and are happy to chat with you and evaluate your need for an attorney.

“Since Day 1 I have been very happy with JJH supporting me and my businesses as my attorneys. As an owner of two businesses, one of which is still budding, I have contracts and agreements that need to be reviewed by attentive, critical eyes and amended with ideas to solidify my stance and protect me and my businesses. JJH fulfills these needs, on-time every time, and I know the JJH team is focusing on my case at that moment.”

–– Erin F.

Joseph Haddad

Joseph is a business lawyer and founder of JJH Law. He focuses on complex civil litigation with an emphasis on employment-related matters on behalf of employers and employees. He's also an avid card player, and in 2006 was ranked #118 in the world by CardPlayer Magazine.

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