Top Legal Challenges for Small Business


Steve Thompson

Jul 17, 2021


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Launching a startup can be an exciting adventure that builds on a lifelong dream. But the dream can turn into a nightmare if you don't have a liability insurance plan or other solutions to legal problems. It's best to create a checklist of the top legal challenges for small businesses before entering a market. Here are essential points to know about legal challenges facing companies with limited budgets.

Litigation Can Take Many Forms‍

One of the top legal challenges for small businesses is to keep legal fees under control. Many companies are backed by insurance that pays court costs. But it's also common for small firms to avoid various types of insurance to cut overall costs. Some of the countless ways a business can get sued include injury in the workplace, defamation claims, and employee accusations about management.

Lawsuits can come from staff members, customers, partners, activists, and competitors. Workplace safety is a top legal issue since employer negligence can harm the safety of its workers and lead to costly lawsuits. Employers are required to carry Workers' Compensation insurance in most states.

Cybersecurity is Here to Stay‍

Cybersecurity in a mobile phone

Back in the 90s, all a small business needed for data protection was antivirus software and storage for regular backups. These days antivirus software alone doesn't provide enough protection from hackers. You need to build several other security layers over your digital assets. Getting hit with a cyberattack can be so expensive in court it could drastically affect the future of your business. Carrying cyber insurance and developing strict cybersecurity strategies helps reduce the impact of a breach.

Specific industries, such as healthcare, are required by law to use high-quality technology and processes to protect confidential information. Failure to comply with HIPAA regulations can result in severe fines.

Intellectual Property Infringement‍

Small businesses typically cannot afford to pay for patents and trademarks when they launch and often don't have the means to produce prototypes for new products. It's easier and more common for a new business to be a reseller or develop a service based on existing products. At the same time, small business owners need to be aware of legal and licensing responsibilities when using the patents and trademarks of other companies.

Businesses of all types must set cybersecurity policies that include forbidding employees to download material from sites that violate intellectual property laws. Allowing employees to participate in illegal downloading can lead to severe offenses. Another problem with interacting with sites that infringe on intellectual property rights is that they are sometimes riddled with malware.

It's also important to note that a business can face legal trouble if an employee shares another company's trade secrets online. This scenario can arise out of quoting private conversations with colleagues in a media interview.

Developing Legal Leads‍

Social Media Manager engaging with audience

Online leads typically come from people who find websites through Google. They may also come from organic social media posts or paid ads. Sometimes leads are generated from word of mouth or response to a blog. The key to developing small business legal leads is to integrate legitimate marketing strategies such as the following:

1. Organic Social Media Posts - Sharing helpful insights on your social media page can stimulate engagement that leads to interest in your products or services.

2. Sponsored Social Media Posts - Promoting your business on social platforms allows you to customize and configure attributes for reaching your target market.

3. E-marketing Campaigns - Email is still one of the most effective ways to engage your target audience.

4. Pay-Per-Click (PPC) Ads - Online advertising is still the fastest way to reach a target audience.

Be aware you need to get permission from each recipient of your regular digital marketing campaigns through email to be compliant with federal trade regulations. In other words, you're not allowed to spam a high volume of random recipients. Failure to comply can result in incredibly high fines.

Avoiding Discrimination‍

Diverse team group

Modern companies look to be more diverse by emphasizing they are Equal Opportunity Employers. They discourage discrimination in the workplace and address it when it occurs. The current business climate points to a need for a stronger effort to acknowledge social responsibility.


Reviewing the top legal challenges for small businesses is a wise move for entrepreneurs before launching a startup. The road to business success is paved with ideas, rules, and intelligent decision-making. Meeting government regulations and avoiding multiple lawsuits are worthy goals for small operators. Today's successful companies understand the need for compliance, strategic thinking, and employing the right marketing software for small business.

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