

Common Legal Mistakes to Avoid in Business
Picture this: You’ve poured your heart, soul, and savings into starting your dream business. The website is live, the products are ready, and the marketing plan is in full swing; but just as you are about to celebrate your first sale, a legal issue surfaces, one you never saw coming. Suddenly, your entrepreneurial dream feels more like a legal nightmare.
In the fast-paced world of business, it’s easy to overlook the legal elements that can make or break your success. From contracts that seem straightforward to regulations that feel like a maze, the landscape is filled with potential pitfalls. However, don’t let fear hold you back! Awareness of common legal mistakes and knowing how to avoid them, can enable you to confidently navigate this minefield and focus on what truly matters: growing your business.
So, let’s dive into the most common legal blunders entrepreneurs make and arm you with the knowledge to steer clear of them.
- Neglecting Proper Business Structure:
Many entrepreneurs rush to get their business started without considering the legal structure. It’s not enough to start using your ‘dream’ business name without a registration; or even stand the risk of someone loving it and using it to incorporate theirs. Don’t end up using your known business of my years as ‘alias. Your goals and the implications should guide your legal expert on what is best for you.
- Ignoring Contracts:
I can’t emphasize on this enough. I have this client who in a gentleman arrangement, invested over N100m on a venture managed by his friend. Now they were no clear terms so when the business went south, he practically lost everything.
As we can see from above, relying on verbal agreements or informal arrangements can lead to misunderstandings and disputes. Therefore, always put agreements in writing, except it is a lose you can let go. Contracts should clearly outline the terms of the agreement, including payment terms, deliverables, deadlines, and dispute resolution mechanisms. Having a lawyer review contracts can safeguard your interests.
- Failing to Protect Intellectual Property:
In 2023, I and some amazing ladies were doing sone live streams under Women of Impact. We got this info of a lady who had patented a name around that but not exactly.
Overlooking the importance of intellectual property (IP) can result in loss of competitive advantage. Therefore, identify your business’s IP, be it trademarks, copyrights, patents, then take steps to protect it through registration. This can help prevent others from using your ideas and reinforce your brand’s value.
- Not Understanding Employment Laws:
You can’t be an employer of labour and not have a little understanding of employment laws/regulations; or get an advisor in that wise.
Familiarize yourself with labour laws, including those related to wages, benefits, and workplace safety. Ensure that your employment contracts are compliant and that you classify your workers correctly.
- Overlooking Regulatory Compliance:
Regulatory compliance can kill your business if not handled properly. There was a year we paid taxes in 8 digits!
Businesses often overlook industry-specific regulations, leading to fines or shutdowns. Research and understand the regulations that apply to your specific industry, then regularly review compliance to adapt to any changes in legislation.
- Inadequate Record Keeping:
This is one major area lots of businesses have issues. Do you capture all your expenses, purchases etc?
Poor record-keeping can lead to difficulties in audits, disputes and general mismanagement.
To avoid these, implement a robust system for maintaining financial records, contracts, and correspondence. Good record-keeping not only supports compliance but also provides valuable insights for decision-making.
- Ignoring Consumer Protection Laws:
While this may appear to be literally ignored in our clime, don’t make yourself the scape goat who suffers for the sins of others!
Businesses that fail to comply with consumer protection laws risk lawsuits and reputational damage. Be transparent about your products and services, ensure fair advertising practices, establish clear return and refund policies and familiarize yourself with laws governing consumer rights to avoid pitfalls.
- Inadequate Insurance Coverage:
Many businesses underestimate the importance of adequate insurance, leaving them vulnerable to lawsuits and liabilities. Consult with an insurance professional to determine the types of insurance necessary for your business which could be general liability, professional liability, fire, theft and burglary, property insurance, etc. Ensure your coverage is sufficient to protect against potential risks.
- Not Having a Clear Dispute Resolution Process:
Failing to establish a process for handling disputes can result in prolonged conflicts and costly litigation. Create a clear dispute resolution plan that outlines how disputes will be managed, whether through mediation, arbitration, or litigation. This can save time and resources when conflicts arise.
- Neglecting Data Privacy Regulations:
With the increasing focus on data privacy, businesses that overlook regulations like the General Data Protection Regulations can face heavy fines. It is important to understand the data privacy laws applicable to your business and establish robust policies for data collection, storage, and sharing. Regularly audit your practices to ensure compliance.
Navigating the legal landscape is crucial for any business, whether you’re a startup or a seasoned enterprise. This is because legal missteps can lead to costly penalties, damaged reputations, and even the failure of a business. When you invest time and resources into legal compliance and protections, you not only safeguard your business but also build a strong foundation for growth.
Our best seller ‘The Business Owner’s Guide: A compendium of legal, financial & business mistakes and how to avoid them’ is your daily go to guide: get your copy here: https://sarahogah.com/academy/shop/?add-to-cart=524
Confused on where to start? We are here to support you through it all. Book an appointment here: https://calendly.com/sarahogahbrand
As always, I’ll see you at the top!
Sarah