Four Legal Mistakes That May Be Harming Your Business

One of the most important and most overlooked things that help make you business a success is your ownership structure.

You might think it is of no importance, whatever it happens to be you can sell stuff, right? Kinda, but that’s not the important part.

Maybe you need to have something registered in more than one geographic region. What would happen if a competitor registered a businessĀ in an adjoining State that meant you couldn’t trade there with your existing name? Nothing, if you registered yours first.

You may not want to trade in many countries, and the internet can make it easy to actually trade in a single jurisdiction while servicing the planet – but if you want to avoid the same issues then you may want to own a number of country-based business registrations. For example: you have a .com business and somebody registers the same name but with a country-specific suffix: yourname.com becomes yourname.com.xx. People in that country might look for a local branch to do business with, which means all your advertising is building their business too. The same can be true for .biz, .tv and all the other suffixes.

A second often overlooked feature is the contract you have with those in your employ. Think you’re friends and don’t need one? Think again – a falling out can damage your business and cost you the friendship. (But please don’t ask me how I know!) You don’t need a 20 page document that prescribes how often they breathe per hour, but you do need a clear description of what you want them to do, what you will do in return – and that can be more than just salary, their authority and responsibility, and any ownership share that they have or may qualify for.

Your premises need to be somewhat guaranteed for the duration, you don’t want to be moving every couple of years. Your customers may follow you for the first couple of moves but after that you will start to look a bit, well, shifty. A typical lease has an initial period that is under lease, with a second period that is offered on a ‘first refusal’ basis. Maybe you have a “3 x 3” meaning you have a lease for 3 years, plus an option on the next 3.

Likewise your contracts with your suppliers (and your customers) need to cover more than just a single transaction. Your needs will change over time, so you will require different service from your suppliers, even if that’s just double or triple the quantity you now need, or for them to service the additional premises you have just expanded into. By the way: the contract works both ways – you get guaranteed delivery and service levels, they get guaranteed sales. It’s a win/win, as long as the signed contract exists.

All legal agreements should be locking a win/win into place. If they are too one-sided then somebody is at risk of being forced out of business. That’s bad if it’s you, and it’s bad if it’s the other business: do it often enough and you have nobody to do that trade with, and that puts you out of business anyway.

Successful businesses are about solving somebody’s problem: Hungry? Buy this food. Need transport? Buy this car. Cold? Buy these clothes. Need premises? Rent this space. Need help? Hire this person. If your business does nothing except solve other people’s problems, and they pay you for doing so, then your contracts will reflect the right balance, and if you look for the same kind of connection when it is your problem being solved then you have a solid foundation for a long term business.

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