Business owners are often flying blind when it comes to the legal aspects of their businesses, or even worse, erroneously thinking they know how to protect themselves based on common legal myths. These myths could all get you into trouble, if you didn’t know any better.
Myth: Personal assets are always protected by the right business entity. Truth: Choosing a corporation or an LLC as a business entity provides some asset protection, but it isn’t ironclad. If someone is determined to go after you personally, it is possible for them to pierce that protection, and it is easier than you may think if you haven’t kept up on proper corporate and business procedures or if you have comingled business and personal funds.
Myth: Patents and Non-Disclosure Agreements protect intellectual property always and everywhere. Truth: Registration is only the beginning. Enforcement is a whole different animal. It helps to have your idea protected, but if someone has more money than you do and can afford to outlast you in litigation, or if they are located overseas and are very hard for you to prosecute, in essence they can steal your ideas.
Myth: Conversations between lawyers and their clients are always confidential. Truth: While the attorney-client privilege is very strong, it is not always absolute. For certain circumstances, a judge can pierce this privilege and order that the attorney share confidential information and in other situations an attorney has a duty to reveal confidential information, like to prevent a crime from happening.
Myth: Good contracts are complicated. Truth: Good contracts are clear and understandable. Complicated contracts often have contradicting provisions, and it’s hard to know what you are agreeing to when you can’t understand what the document says. The best contracts are simple and unambiguous, and that makes it possible for everyone to hold up their end of the bargain, since they know their obligations and the consequences of a breach.
Myth: Your online posts are protected from libel claims. Truth: Even if you frame your post clearly as your own opinion, and not a statement of fact, you can be sued if someone thinks that you have libeled them. You will be stuck defending yourself, and with the costs of that defense, you lose even if you win the case.
Myth: If someone is injured on your property, you’re liable. Truth: There are certain circumstances where you are not responsible if someone hurts themselves on your property, like if they were reckless or engaged in a criminal act. Keep in mind, though, that if you were negligent or intended to harm someone, your insurance will probably not cover any damages.
Myth: You can’t be sued if you did nothing wrong. Truth: Anyone, anywhere, at any time, can sue you for any reason. It’s called frivolous litigation, and even if you prevail, you can spend big money getting out of it.
Myth: Once you get a trademark, it’s yours forever. Truth: On the contrary, getting a trademark is just the first step – the really important part is protecting that trademark. Your trademark protection can be erased by not enforcing your trademark when you learn of infringers, or if your trademark becomes so associated with a product or service as to become a generic word used to describe that thing. Did you know that Zipper used to be a brand? Market dominance can sometimes be dangerous territory for a brand to be in.
Myth: Lawyers are a necessary evil only to be used as a last resort. Truth: It is amazing how many people won’t invest a few hundred dollars for solid legal advice that may save them a fortune and lots of pain in the future. Providing the right advice at the right time, before a problem is allowed to arise, is the best value an attorney can provide to a business owner. Waiting to have your lawyer act as a legal crisis manager is a very expensive underutilization of your best resource.
Good legal strategy and planning begins when you start your business, not when you get into trouble.
If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.
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