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2 legal challenges for small to midsize businesses

On Behalf of | Feb 26, 2024 | Business Law

When thinking of companies, it is often the largest corporations that come to mind. However, the truth is that small to midsize businesses make up the backbone of the U.S. economy. In fact, small businesses account for over 99% of all U.S. firms.

Small to midsize businesses don’t have the legal resources of the largest corporations, so it’s important to recognize the key challenges that smaller companies face. Outlined below are some of the most common legal challenges for small to midsize companies.

1. Legal structure

There are various different structures that a company can take, with each having its benefits and potential drawbacks. For small startup companies, a sole proprietorship can be useful. This means that one sole owner can begin trading almost immediately from their personal accounts. The downside of this is that the owner takes on personal liability should the company get into debt or other forms of legal trouble.

Limited Liability Companies (LLCs) are another popular legal structure. As the name suggests, they limit the owner from personal liability should the company incur debts. Choosing the appropriate legal structure is one of the key legal challenges that small to midsize businesses face.

2. Contracts

Contracts play a crucial role in nearly every action a business takes. For example, a partnership agreement defines the roles and responsibilities of business partners. Employment contracts outline the rights of key workers. Vendor contracts ensure that businesses receive goods and that prompt payments are made. The importance of getting these contracts right cannot be understated.

These are just two types of legal issues that small to midsize businesses have to address. To navigate the legal aspect of running a company, it can be beneficial to obtain as much accurate information as possible.