Creative Ways to Protect Your Small Business Legally At Minimal Cost

In our culture, legal support is often viewed as a luxury, than a necessity. We don’t typically subscribe to a legal retainer with a law firm during the early stage of our business. Why? Because we tend to focus on selling, marketing, and survival than the legal aspect. But in my experience, I would recommend that we establish our legal structure early on to avoid mishaps in the future.

As a startup or a small business, here are some guidelines on how to protect ourselves legally without necessarily hiring a legal retainer.

  1. Company Registration. Register as a corporation as this limits the liability of the owner or shareholders. You won’t be personally liable to the debt of the corporation. Gone are the days that we need to find dummy shareholders in the Philippines because of our support for a one-person corporation. I won’t mention details of others like, BIR, City Hall, SSS, PHIC, HDMF, etc., as these are all mandatory and straightforward.
  2. Employee Onboarding. Make sure you secure signatures of the following when you signup a new employee:
    1. Job Offer
    2. Job Description
    3. Employment Contract
    4. Accountability Forms
    5. Company Policies, Employee Manual and Code of Conduct
  3. Employee Management and Firing.  
    1. Document all incident reports, issue Notice To Explain on every incident and implement disciplinary actions according to your code of conduct.  
    2. If you want to fire an employee, schedule an admin hearing to let him/her state their case, and then execute fairly.
    3. Set a quarterly reminder to allow employees to evaluate themselves, then followed by the supervisor’s evaluation and then score them 1-10. For probationary employees, make sure to have a performance evaluation every 3rd and 5th of the month.
  4. Sales Contracts. This is basic, but we tend to disregard once we signup a deal with a customer. Make sure all your projects or sales are well documented with details like project period, the scope of work, and payment terms. Be also mindful of the termination clause. Some customers see a weak termination clause as an opportunity to terminate and ask for a refund, but in reality, they just changed their minds or have no budget at all.
  5. Service Delivery. Document, document, document. Make sure to document all services rendered by securing a service delivery acceptance form. If you deliver goods, a delivery receipt is a must. Record every minute of the meetings and file them up properly for easy retrieval during a legal mess. If the customer issues a demand letter, make sure to respond.
  6. Tax Management. This is a broad topic, but the most basic is proper filing to BIR of sales and expenses regardless if you have transactions or not. Consult with an accountant and get a copy of tax filing schedules and deadlines.

Dealing with legal issues are inevitable when your business grows. Thus if you set your legal structure early, then it will significantly help you in the future. Hiring legal will obviously protect you later on as I still recommend this when your budget permits.