Legal Issues that Small Businesses May Face

Small businesses often encounter various legal issues. This could be in relation to:

  • contracts, 
  • permits, and 
  • compliance. 

If you run a small business, navigating these challenges is crucial for maintaining a successful and legally sound operation.


Contracts are the backbone of business relationships, outlining the terms and obligations between parties. Small businesses need well-drafted contracts for clients, suppliers, employees and more. 

Legal issues can arise if contracts are ambiguous or not properly executed. To address this:

  • Your contracts should have precise language and use clear terms for outlining deliverables, payment terms, timelines, and dispute resolution mechanisms.
  • Enlisting legal professionals to draft, review, or negotiate contracts ensures legality and protects your interests.
  • Maintain consistency in contracts to avoid discrimination claims.

Permits and Licenses

Operating a business often requires obtaining permits and licences to comply with local, state and federal regulations. For example, if your business involves selling alcohol, you will first need to obtain a liquor licence. Moreover, regulations in each state may vary so you need to look into the local rules that apply.

Some key steps include:

  • Research: Identify the permits and licenses relevant to your industry and location. This might involve zoning permits, health department approvals, or professional licenses.
  • Application Process: Follow the proper procedures, filling out applications accurately and providing necessary documentation.
  • Renewal and Updates: Stay informed about expiration dates and renewal requirements to avoid disruptions in your business operations. Parties often fail to do so but remember that most licences and registrations come with expiration dates. You must renew all such documents on a regular basis.  


Failure to comply with obligations can lead to serious legal consequences. When it comes to businesses, common compliance areas include:

  • Employment Laws: Comply with labour laws such as minimum wage, overtime, workplace safety, and anti-discrimination laws.
  • Tax Obligations: Understand your tax obligations, including sales tax, income tax, and employment taxes. Keep accurate financial records for auditing purposes.
  • Data Privacy: If handling customer data, comply with data protection laws. Implement proper security measures and inform customers about data usage.
  • Environmental Regulations: If applicable, follow environmental laws related to waste disposal, emissions, and sustainable practices.
  • Intellectual Property: Protect your intellectual property (trademarks, patents, copyrights) to prevent infringement and safeguard your business identity.

Risk Management

All businesses are susceptible to risks and threats. To minimise risk, look into the following:

  • Insurance: Obtain relevant business insurance to cover liability, property damage, and other potential risks.
  • Store Everything: Keep records and documents of all transactions, communications, and interactions. These can be valuable in case of disputes.
  • Regular Reviews: Periodically review and update contracts, compliance procedures, and permits to adapt to changing regulations and business needs.

Legal Counsel

Small businesses should have access to legal counsel for advice and assistance in complex matters. You can either opt to keep an in-house counsel or speak to external law firms to help you with your responsibilities.

  • Consultation: Regularly consult with legal professionals to stay informed about changing laws and regulations affecting your business.
  • Emergency Support: Have a legal expert you can turn to in case of urgent legal issues, such as contract disputes or compliance violations.

Author info:

John Bui is the Principal Solicitor of JB Solicitors – a law firm based in Sydney, Australia. John is a Nationally Accredited family law Mediator and Arbitrator with over 10 years’ experience in family law and commercial litigation.



Please enter your comment!
Please enter your name here

Stay Connected

Read On