Small businesses are businesses that are owned and operated privately. These businesses have a relatively low volume of sales, as well as a small number of employees. U.S. small business standards vary by state and on an industry-by-industry business. Small businesses are becoming increasingly popular due to the relative ease of operation, and because certain tax deductions for small businesses are commonly available.
Generally speaking, a small business is defined as having less than five hundred employees for manufacturing industries, and less than $7 million in annual income for non-manufacturing industries. Small businesses most commonly take the form of a corporation, partnership, or sole proprietorship.
The laws which govern small businesses mostly cover license requirements related to the type of activity that the entity engages in. Failure to meet the legal requirements for small businesses can result in penalties such as fines, jail time, or a revocation of operation privileges. Licensing requirements can be further divided up into Federal, State, and Local requirements.
Small business management refers to the overall administration and overseeing of a small business enterprise. This is most commonly handled by a group of members of the company. However, small business management can sometimes be handled by just one person. This is especially true for smaller businesses. Additionally, some of the management tasks can be outsourced to specialists if there is a need for expert assistance.
Some examples of common small business management tasks may include:
- Handling start-up and registration of the company;
- Hiring and training new employees;
- Managing loans and debts;
- Managing advertising;
- Finding sources for things such as materials, production, etc;
- Maintaining business property; and
- Creating, maintaining, and addressing relations with other businesses.
What Are Some Common Small Business Management Disputes?
Small business management can sometimes be the cause of business disputes. Some of the most common examples of small business management conflicts may include:
- Conflicts with employees;
- Labor union conflicts;
- Issues with white collar crime, such as tax evasion or fraud;
- Disputes with other businesses, such as those involving trade secrets, unfair competition, etc;
- Handling employee benefits and wages; and
- Compliance with federal and state laws, such as Americans with Disabilities Act (“ADA”) and other handicap accessibility laws.
Additionally, some small business management claims can involve government issues such as zoning and city ordinances. These issues often require the assistance of a legal professional, or a city auditor.
Employment issues, financial issues, liability, formation, and other elements of running a business are all different for small businesses when compared to other types of companies. Another way in which small businesses differ from their larger counterparts involves the types of disputes they face. Disputes for any business can arise between customers, clients, vendors, contractors, partners, landlords, and more. However, it is most common among small businesses for partners to face issues over succession plans, as well as disagreements among partners and owners.
A small business succession plan is an agreed upon plan for the business. This plan clarifies what is to happen if one of the owners dies, or becomes permanently disabled. The owner of a sole proprietorship may be especially vulnerable to facing difficulty without a succession plan. The business will likely be forced to terminate, which may not have been the intention of the business owner. Another common scenario would be that the owner wanted an heir to inherit the business; however, without proper planning, the business may suffer significant losses or ultimately be terminated.
Businesses that have multiple owners may face similar serious challenges when an owner dies or becomes permanently disabled. Generally speaking, it is best practice to provide a succession plan in the business entity formation documents. What this means is that when the business is first formed, there is usually a document which details how the business is to be governed.
That governance should account for how the death or permanent disability of an owner will impact the business. The business owners can choose for the deceased or disabled owner’s share to be distributed among the remaining owners. Alternatively, they may allow the deceased or disabled owner’s share to pass to that owner’s heirs. There are a few exceptions, such as ownership in a law firm. This is because non-lawyers cannot own an interest in a law firm. However, the options are generally the same for most businesses.
By agreeing in advance as to how to handle this type of situation, the business can be saved. And, the owners could face significantly less stress when the unexpected does happen. Planning can also mitigate the risk of disagreements among the partners related to any and all other matters. A clear understanding of the rules governing the business will help reduce the risk that any serious disagreements will negatively impact the business.
How Are Small Business Management Disputes Handled?
Small business disputes generally require legal action in order to be resolved. This often includes internal conflicts involving major violations, such a fraud or hiring disputes. In some especially serious cases, the dispute could require investigation by a government agency. An example of this would be an investigation conducted by the Equal Employment Opportunity Commission (“EEOC”).
The best way to resolve small business disputes is to carefully communicate expectations up front. If all parties are as clear as possible, it is less likely that there will be any sort of serious issue later on. When expectations are not clearly established, or when communication comes to a standstill, business owners must find another means of resolving their conflicts.
By proactively developing quality agreements that also specify how disputes are to be handled, small businesses can avoid a significant number of issues later on. Many small business management disputes can be prevented or minimized by hiring a professional, who can help ensure that the company is complying with state and federal legal requirements.
Small business conflicts and disputes may be resolved through a number of means, including:
- Alternative dispute resolution (“ADR”);
- Government investigations, as previously mentioned; and
An example of this would be how a dispute over a single item of business property may simply require mediation in order to be resolved. Larger disputes, such as disputes involving the sale of a building, may require a lawsuit in order to resolve the issue.
Some types of small business conflicts may be resolved through still other means, such as re-working a business contract or rewriting an employment policy to better suit current needs. These measures can help redefine the company’s intentions in order to help avoid similar conflicts in the future.
Remedies can vary widely. From attending counseling with a business partner in order to develop better communication skills with each other; to the more extreme option of taking a partner to court to settle disputes. Between the two examples, there may be other options. These generally include mediation or alternative dispute resolution, which can help business owners resolve their differences.
Issues involving parties outside of the organization, such as clients, contractors, vendors, may also be resolved through similar means. Going to court is usually the last resort, due to the fact that litigation is expensive and takes a considerable amount of time.
Should I Hire a Lawyer for Small Business Management Disputes?
Generally speaking, small business management disputes often require legal assistance to resolve them. You should consult with a local small business lawyer if you are facing disputes involving small business management, or would like input and research regarding the laws in your specific state.
An experienced and local business attorney can ensure your business is in compliance with both local and federal laws. Finally, an experienced business attorney can also represent you in court, as needed.