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Tips on Legal Matters

Avoiding Legal Problems

  • Arm yourself with basic knowledge of business law so that you're alert to your company's obligations and rights.
  • Practice prevention. Have your attorney review contracts and agreements before they're signed.
  • Get your attorney's opinions on documents you have drafted-such as employee policies-before you put them in place. You want to make sure they meet the requirements of the law.
  • Familiarize yourself with trademark and patent laws so that you don't violate them. Learn how to apply for a trademark or copyright should you need to do so.
  • Understand the law as it pertains to your organizational structure. Your legal obligations as a C corporation, for example, will differ from those as a sole proprietor.

Employers to Implement

  • A policy which states that the company is an equal opportunity employer and strongly enforces a nondiscrimination policy. 
  • A strong sexual harassment policy detailing what is not accepted at your place of business.
  • A policy about phone and/or email communications.
  • Expectations of employees.
  • Include how your company plans to monitor or take action on all of the stated policies.

Developing an Employee Handbook

  • Some company policies have to be in writing-such as policies on sexual harassment and discipline-so that employees know what is expected of them. These can form the basis of an employee manual.
  • Draft your employee handbook yourself or assign someone else in the company to do it. Then have it reviewed and fine-tuned by your lawyer.
  • Include a disclaimer stating clearly that the manual is in no way a legal contract.
  • Visit the SBA at and search for "employee handbook" to find several relevant articles on creating an effective employee handbook and human resources management.
  • Make sure every employee receives a copy of the handbook and signs a statement saying they've read it. Review it every six months or so and update it as needed.

Advertising Legally

  • Don't engage in false, misleading or deceptive advertising. Make sure your claims are accurate.
  • Obtain written permission to use photographs, endorsements, or quoted matter. Remember that some material is protected by copyright.
  • Don't use words and phrases like "free" and "easy credit" unless they're true. Easy credit, for example, means you offer credit to poor risks without charging them more for it.
  • Remember that consumers can sue you for deceptive advertising, and federal, state, and local governments can take action against you.
  • For more information, visit , a Web site from, Inc., a self-help legal publisher in Berkeley, CA.


  • If your company has an invention that you think is patentable, take steps at once. You may lose your right to patent it if you offer it for sale or disclose it publicly without patent protection.
  • Make sure your product or invention is not infringing on someone else's patent. Your library can help you conduct a patents search.
  • Be prepared to establish the novelty of your idea. Keep good records of its development-including dates, drawings, etc.-and round up witnesses.
  • Hire a patent attorney or agent. Look in the Yellow Pages under "Patent Attorneys." Get references.
  • Consider patenting your method of doing business. According to Success magazine, owns the patent on the one-click shopping-cart strategy and successfully defended it in court against Barnes & Noble.

Researching Your Invention or Idea Before You Patent

  • An idea, without knowledge of how to make it work, is not patentable. You must be able to present an illustrated description of a specific useful product, which achieves the desired objective, in sufficient detail to enable others to make and use it.
  • Even then, not every invention is patentable. The U.S. Patent and Trademark Office Web site at sets forth applicable requirements and procedures.
  • A patent takes 1½ years or more to obtain, expires within 20 years and is not renewable. Total costs are typically $8,000 or more, about 50-50 government and attorney fees.
  • Beware of invention promotion scams. Read the Federal Trade Commission's warnings on such scams at .
  • U.S. patents have no effect elsewhere, but a U.S. patent can be used to block importation of infringing products from abroad. Foreign patents are harder and more costly to obtain.

Resolving Disputes

  • Consider adopting an alternative dispute resolution (ADR) program as a way to resolve employer-employee conflicts. It can be less costly and time-consuming than litigation.
  • Understand that ADR uses such tools as mediation and arbitration and is conducted in private.
  • To find help in setting up an ADR program, look in the Yellow Pages under "Mediation Services." Ask other small business owners or your local chamber of commerce for referrals.
  • Remember that ADR programs work best when you have a clearly written ADR policy that employees see as fair. Start by maintaining an open-door policy that encourages employees to bring grievances to their managers without fear of retribution.
  • Visit , the Web site of Chorda Conflict Management. The site includes a Nation's Business article, "A Working Alternative for Settling Disputes," which provides a thorough discussion of ADR.