There are many benefits to starting a home business. You can work from home, earn extra income, and even have the freedom of working at your own pace. But with these advantages comes a risen risk of legal liability. What if your blog posts encouraged people to break copyright laws, spam people’s email inboxes, or violate their privacy?
If you want to start a business for personal gain or even make some extra money on the side without risking everything you own, read on to learn about smart home business legal risks before you get started.
Home Business Legal Risks
Starting a home business sounds like a great idea. You can work from anywhere and at any time, and you don’t have to worry about your boss micromanaging you or second-guessing you.
For example, what if you blogged about the best way to break copyright laws? Or what if you sent spam emails through your email list of subscribers? Or maybe you shared sensitive customer information without their consent? If these situations were to happen, they could have disastrous consequences for your personal finances and future.
In fact, by understanding the most common legal risks for a home business, you can devise a plan of action that will help protect your business – and yourself!
The Pre-Starting Legal Process
Part of the process of starting a home business is protecting yourself legally. The first step to doing so is to consult a lawyer who specializes in home business law. The lawyer will go over all the risks, discuss your options, and help you understand how to minimize those risks.
Once you have a legal advisor, there are four other steps you should take to protect yourself from potential problems:
- Enlisting your company as an LLC or corporation with the state government
- Drafting a clear set of operating agreements for your company
- Drafting a list of social media policies for employees
Determining the Best Business Structure for Your Home Business
The first phase in making a home business is selecting the best legal structure for your situation. Of course, this largely depends on what type of business you’ll be running and what your goals are.
Selecting the right legal structure can save you a lot of headaches down the road. For example, with a limited liability company (LLC), if one of your employees were to get into a lawsuit, it’s unlikely that they would also sue you personally.
On the other hand, if you’re a sole proprietor or a partnership with unlimited liability, not only would the employee sue their direct supervisor, but they could also come after you if things go south. So when setting up your LLC with an online service like LegalZoom, make sure to choose carefully before it becomes too late!
The Publicity and Marketing of Your Home Business
Your blog posts, social media posts, and other content should never encourage people to break the law. For example, if your blog post was about how to make money online, you would never want to include a link that will teach viewers how to steal someone’s identity.
Likewise, it would help if you were very cautious about what you post on social media. It might seem like it’s harmless for your Instagram feed or Facebook page to show photos of your work or family memories, but these posts could expose the location of your house or divulge too much information about who lives with you.
If a stranger were able to find this information and wanted to harm a member of your family, they would have a lot of details about where they can find them! This is why it’s so important for home business owners with children living in the home not only to have safeguards in place for protecting their privacy but also to take extra precautions by teaching their kids about internet safety.
Startups, Inc. vs. Sole Proprietorship
There are two types of business structures with legal risk. Startups, Inc. means you have a corporation with its own legal entity. With this structure, the company is in charge of any liabilities that may occur, but you are only personally liable if the company fails.
A sole proprietorship is the second type of business structure, and it’s what most people think of when they think “home-based business.” With this structure, your personal assets are at risk for liability since you are both the owner and the company. The upside to this option is that it’s easier to start up. You can register your sole proprietorship online with an inexpensive filing fee through commerce websites like LegalZoom.
It all relies on how much individual risk you want to take on when starting your home-based business.>>>END>>
Intellectual Property Rights in a Smart Home Business
One of the most significant risks in a home business is intellectual property infringement. In a smart home business, this risk exists when you do not have a fully developed product or service to offer. When you are taking orders for a product that has not been tested and finalized, your customers may copy your idea and produce something similar before you have had the time to develop it.
Incorporating intellectual property rights into your strategy can help with these risks. You’ll want to trademark, copyright, or patent your innovations as soon as possible so that your ideas are protected from being copied by others.
You get to make the decisions, you have the freedom, and more often than not, it can be more profitable than working for someone else. But with these benefits come increased legal risks.
As a homeowner, there are more ways you can get in trouble on top of running your business from home. Even if you don’t plan on doing anything illegal or risky, you could still be liable for damages or penalties if you accidentally break certain laws or violate someone’s rights.
The best way to avoid these problems is simply by being aware of your legal obligations before you start your home business. Read on to learn about common legal liabilities that come with running a home business and how to prevent them.