Achieving Peak Performance
- New Horizons in Management series
Edited by Cary L. Cooper and Ronald J. Burke
7. Legal issues facing small businesses and their owners Michael Troilo and Brad Carson INTRODUCTION One of the defining characteristics of small businesses is their lack of resources relative to larger firms. This is most acute in the start-up phase, when entrepreneurs are scrambling to survive. Among the expenses that may be postponed is legal counsel. The entrepreneur may rationalize that legal advice, while desirable, is a luxury that can be afforded later in the firm’s life-cycle. We beg to differ. Our purpose in this chapter is to highlight the myriad areas of business operations that require legal attention if one is to avoid catastrophic liability. As one lawyer we interviewed said, “You can pay me now, or you can pay much more later” (Jurgensen, 2010). Understanding the sources of potential legal liability is critical for all businesses, small as well as large, new, and established. This chapter is more than an admonishment to hire legal counsel early; it is a guide for best practices in legal issues among small firms. It is written with both the practitioner and the student of entrepreneurship in mind, and contains not only the common legal pitfalls of operating a business but also tactics to anticipate and avoid them. There is particular emphasis on pragmatism as opposed to theory. We present some legal concepts and cases for context but do not explore them in depth. A person wishing to explore the legal nuances of the principal–agent relationship, for example, would be better served...
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