Seven Common Legal Pitfalls of Owning a Business And the Proven Ways to Prevent Them – Pitfall #4


Owning a business is exciting at times, frustrating at others, but always demanding.  There are so many decisions to make on a daily basis, and often, as a business owner, you not only have to make the decisions, but must also roll up your sleeves to make those decisions bear fruit.  One decision you should make early as a business owner is determining who will be your trusted advisors to guide you through the legal and accounting issues your business will encounter.  Selecting a professional to assist you with legal and accounting decisions is vital to launching and maintaining a viable enterprise, because decisions made early in the formation of a business can have far reaching consequences down the road.

In my practice, I often see clients who chose to handle matters without engaging attorneys and accountants early in the process, and later failed to recognize issues as they arose during the day-to-day operations of the business. Those decisions can cost business owners far more money down the road than hiring the appropriate professionals in the beginning, and can have a significant effect on the ultimate success or failure of the business.  I have found those mistakes fall into seven basic categories. This is Pitfall number 4 of 7 common pitfalls I see businesses owners make. Over the next few weeks, I will be sharing all 7 of these pitfalls and proven ways to prevent them.


Pitfall # 4 – Failure to Address Employment Issues

Proper Documentation of Employees – Federal laws require all employers to obtain copies of certain documents at the time of hire, and to maintain copies of those documents on file for the duration of the employment.  Best practices should be adopted for all incoming employees to ensure proper documentation is received.  In addition, routine audits of employment records should be performed to make sure a company’s records would pass muster in a federal audit.  Failure to adhere to these laws can result in the business being shut down, and even criminal charges in some circumstances.  Consulting with an HR professional or an employment attorney on proper procedures and best practices in hiring and record retention is advisable.

Employment Contracts – North Carolina is an “at will” state, which means employees may be hired and fired, at will, for any cause or no cause at all.  Accordingly, most employees do not have written employment contracts.  There are two exceptions.  The first would be a union contract where a collective bargaining agreement governs the employment relationship.  The second would be a key management position where a written offer of employment is agreed to between the company and the employee.  The laws which govern what employment contracts can and cannot provide are constantly evolving.  A business wanting to use a written employment agreement to retain top executives in its business should have an employment attorney draft a standard employment agreement to ensure the employment laws regarding restrictive covenants and non-competes, confidentiality, termination, and the like are adhered to.  If you have a written employment agreement that you have been using for a number of years, it is good idea to have it reviewed every few years by an employment attorney to make sure the provisions in it are still enforceable.

Employee Policy Manual – Since most employees do not have an employment contract to govern the terms of their employment, any business that employs more than three people in the business should have an employee policy manual to guide the employment relationship. The employee handbook can cover an array of issues. One important area to address is use of computer systems and the internet. Having policies in place regarding use of a computer terminal at work by employees has been increasingly important in the age of cyber security. An HR consultant or employment attorney can prepare an employee handbook, or review and update any current policies and procedures a company may already have in place.

About the Author

Ashley focuses her practice on Outside General Counsel Services and Business Bankruptcy and Creditor’s Rights Practice Areas. She is an effective, results-driven advocate for her clients.  Her background of 30 years in business bankruptcies, distressed debt workouts, problem loan recovery, and real estate title and commercial litigation provides her with a solid foundation of general business, accounting and legal skills.




Ashley Rusher