As 2014 rolls in, many of us are thinking about how we can improve ourselves (and work off too much holiday feasting). It's also a great time for small business owners to self-reflect on the previous year's missteps and to course-correct for a smoother, more prosperous year. While shoring up your company's legal preparedness may not be the most exciting New Year's resolution, it can be one of the most critical.
According to Rocket Lawyer's recent semi-annual small business index, 58 percent of small businesses dealt with a legal issue in 2013. With many small businesses priced out of traditional (and costly) legal services, it's safe to say that many SMB owners were forced to face these legal issues alone.
But resolving to strengthen your legal defenses doesn't have to break the bank. With a little legal planning, you can coast through 2014 with confidence and peace of mind.
Here are four ways you can do just that:
1. Your Incorporation Resolution.
The New Year is one of the best times to incorporate -- with a filing date of January 1. You'll save time down the line because the business won't need to file separate tax returns for the unincorporated entity and the new C-Corp, S-Corp or LLC. Or you can opt to file before the end of 2013, but with a delayed-effective filing date of January 2014. Doing so means you will steer clear from paying a yearly government tax for only a few weeks of service, enjoy faster processing without paying for it and give yourself some extra time to sort out your documentation.
2. Get it in Writing.
Almost 40 percent of small businesses reported having legal problems with contracts in 2013, either with negotiations or failure to collect payments. In an effort to prevent these issues, always put the agreed upon deal in a written contract that defines the scope of work.
3. Payment Plans:
Be clear with your customers about expected payment terms, and always ask for a second contact to use when sending invoices. Be sure also to establish a definitive due date, but count on at least some percentage of late payments when doing your financial planning. And remember that it's important to create a legally binding contract outlining your agreements, especially when dealing with vendors.
4. Keep Good Counsel.
With so many small businesses facing legal issues, naturally, having a good business attorney can mean the difference between success and failure. While you may not be able to afford to keep one on retainer, tapping into online legal services can help to mitigate costs while receiving necessary services.
Lisa Honey is the Business Lead for Rocket Lawyer's Legal Documents business line. She left the traditional practice of law after seven years in commercial and civil litigation to join Rocket Lawyer. She's licensed in California, Texas and Arkansas.