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Regular employment

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Class action lawsuit

Shareholders agreement

Most common legal issues businesses' face and dealing with them

Legal issues are part and parcel of running a business. Here are the most common businesses' face and how to deal with them.

Owning a business is no walk in the park and not for those who quit easily. Many big names in business now such as Apple, Starbucks and Disney have gone through their share of ups and downs, including legal issues and challenges. Legal issues are part and parcel of running a business. It is vital to know how to prevent them from happening and how to deal with them should they arise. Here are the most common legal issues faced by businesses and how to deal with them.

A.         Legal issues with employees

Employees are every company’s backbone but they can turn into a liability if not managed correctly or if the ground rules of their employment aren’t properly set at the start. With startup companies and small businesses the hiring process is normally informal and the employment relationship undocumented, but this is not a recommended practice.

The employees’ rights and responsibilities need to be properly laid out in an employment contract. There are many different types of Employment Contracts depending on the employee's status (i.e. regular, probationary, fixed-term and project-based) and the correct type should be used to minimize issues with them.

The company should also have an internal code of conduct for employees to adhere to. Having a work environment that respects health and safety standards and which complies with government regulations is also a must, especially in light of the COVID-19 pandemic.

B.         Copyright and Patent Issues

While designing and developing your company’s product make sure that your research and development teams thoroughly protect the patents and copyrights over it to avoid pirating from competitors. Intellectual property infringement could lead to loss of business, revenue, reputation and competitive advantage, unless proactive steps are taken to protect IP and deter potential infringers.

Your employees should execute an Employee Non-Disclosure Agreement to protect confidential and proprietary company information.  When dealing with 3rd persons, such as potential business partners and consultants, make sure they sign either a Mutual Non-Disclosure Agreement or Unilateral Non-Disclosure Agreement respectively for the same purpose.

C.         Dissatisfied Customers

Dissatisfied customers can file a class-action lawsuit against your company, where they gather in a large consumer group and attack your company over faulty products, services or claims. They can also individually file a complaint for damages against your business for any fault in your products. This can damage your business and affect your brand’s image and reputation permanently.

Make sure the terms and conditions for using your product include a prohibition on instituting a class action lawsuit as well as other limitations when it comes to litigation against you. A lawyer should review the terms and conditions of your product to include the necessary protections for your business. Examples of these are limitation of liability clauses which effectively limit the amount of damages that may be claimed against you by a dissatisfied customer. Another example is a venue clause which dictates the place where a suit must be filed, which is normally the place where the company's principal place of business is located.

D.         Disagreements between shareholders

It may be easy to share the same vision with a friend or colleague when starting a company but once it takes off and starts to get more serious, misunderstandings sometimes arise. This can be due to one of the shareholders wanting a different path for the company or pursuing a different endeavor. No matter how much you trust them, it’s important to start working with a shareholder’s agreement. This will outline the rights and responsibilities of each shareholder and how the company should be run.

There is no guarantee that your business will be free of legal issues but should they arise it’s better to be equipped with the proper business documents and legal advise. Prevention is better than the cure.

With Legal Tree you can create the above-mentioned business documents and customize them to your business anytime online within minutes using our innovative Q&A tool. If you need legal advise for your business, you can consult our experienced Partner Lawyers with the right specialization fast and at affordable rates.

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The Legal Tree team
Mobile: +63 908 633 5638