9 Law Issues Keeping Small Business Owners Up at Night

As a retailer, you’re in the business of selling a great product, providing excellent service, paying attention to your loyal customer base and finding new ways to bring in more shoppers. With a list of responsibilities that grows every day, adding legal requirements can keep many small retailers up at night. You’re not in business to practice law, but running a business requires addressing a number of legal concerns – which are important to the health and vitality of your shop.

The following tips can help you sleep a little more soundly:

  1. Form an entity. When you start your business, you must form an entity in your home state. For smaller businesses, a limited liability company (LLC) is often a good choice, but a corporation can sometimes provide a more favorable management structure in particular circumstances. Either way, creating an entity provides the business owner a shield from personal liability. So, if something goes wrong, only the business’s assets – and not the owner’s personal home, car, money or other assets – are on the line.
  2. Abide by local licensing regulations. You might not have known this, but some municipalities require certain business owners to acquire a business license in order to operate. Contact your city hall to determine what applications you might need to file in order to get yourself open for business.
  3. Collect sales tax. If you have a brick-and-mortar store, collecting sales tax is relatively simple: you must collect whatever percentage your state levies for sales of goods. If you are selling goods online, you can consult a business accountant to determine which sales taxes, if any, you need to collect. An accountant can also help you track any local or federal taxes payable each year, as well as employment-related taxes if you have full-time help in your store.
  4. Consider your employees. If you have full-time employees, you need to pay them the applicable minimum wage, provide them any benefits that your state law requires, collect the proper state and federal employment taxes, and otherwise monitor the employer-employee relationship. Employment contracts should always state that the employment is “at-will,” meaning both employer and employee can terminate the relationship at any time. Finally, be a good boss. Lay out clear expectations and provide your employees the resources they need to carry out your vision. They will reward you with consistent work and companionship as you make your way through the adventures of owning a business.
  5. Memorialize your professional relationships in writing. You would never take a lease on a handshake deal, so don’t do so for purchases of equipment or inventory, either. Keeping detailed records of your contracts and agreements can be quite handy if you need to check back later. Store documents electronically in a password-protected file. Keep originals of government-issued records, such as business licenses or tax filings. Even in situations where your correspondence was limited to e-mails rather than formal contracts, keep the e-mails saved in your business account for later reference. If you conduct business over the phone, follow up with a letter or e-mail so that you can jot down the content of the conversation. By taking a few minutes for these efforts, you can avoid costly and frustrating fights over who-said-what later on.
  6. Take Internet precautions. If you are planning on selling products online or building a Web site (and you should!), set up proper procedures for security and data privacy. Your site should contain terms and conditions of use as well as a privacy policy explaining whether you use cookies to collect consumer data or how you will collect, store, and use the data. While aggregated consumer data can provide insights of who your customers are and what they want, you should never sell or transfer personal information such as names and e-mail addresses or credit card numbers to third parties without your customers’ consent. Doing so can lead to both legal liability and a horde of angry buyers, who will never return and will advise their friends and family to do the same. Also, find a credit card processor to administer your online purchases; companies who provide such services will automatically take care of the security you need.
  7. And don’t get into Internet fights. Having a positive online presence is crucial in today’s Web-driven retail economy. Social media provides both companies and customers with outlets for information and opinions about new products and services and the overall retail experience. If a customer has something negative to say, use it as an excuse to make improvements. Listen to the criticism and fix the problem. However, getting defensive never works out in the retailer’s favor, so don’t bother.
  8. Mind your IP’s and Q’s. “Intellectual property” (IP) refers to a body of law dealing with multiple different areas; patents, copyrights, trade secrets and trademarks are the most common. Retailers will most likely deal with trademarks, which are the legal side of a brand. Your store and product names are trademarks. So is your logo. When you choose them, search the Internet to see if anyone else is already using a similar name for similar products. If you want to be extra safe, contact an IP attorney to search for you, and follow up with a federal trademark application. The search provides a safety net from receiving a cease and desist letter or a lawsuit to defend because someone else claims that you are damaging them by using your name. A trademark registration provides you rights against any other companies who later adopt a similar name and divert business away from you. The rule of thumb with IP is simple: a small, voluntary financial investment up front almost always fends off a much larger, involuntary one later.
  9. Get the proper insurance. What happens if a fire or flood damages your store? If a customer slips on some water and breaks a bone? If an employee accidentally damages your stock of products? The right insurance plan can protect you from being on the hook for liability, so contact a reputable insurance broker to see what plans are available that match your need and your budget.

Finally, be realistic with the time it takes to get these things in order. Things don’t happen overnight – no matter how much you wish they may. Be realistic with your planning on these tips above as well as all your small business goals to help avoid trouble later.

Contributed by Lema Khorshid, one of the founding partners at Fuksa Khorshid, LLC, where she handles a wide range of legal matters for small to mid-sized closely held businesses in Chicago and New York, with a strong focus on the hospitality industry.  Prior to being a partner at Fuksa Khorshid, LLC, Lema spent over six years consulting hospitality, fashion, and entertainment clients on their branding and public relations strategies and initiatives in Chicago. 



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