Common legal mistakes SMEs make and how to avoid them

LEGAL matters can be confusing within the business landscape and particularly so for small and medium-sized enterprises (SMEs).

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From contract drafting to intellectual property protection, doing business in accordance with the law can be complex.

Mistakes can be costly and can even lead to more serious consequences, such as significant financial loss or business closure.

For example, in 2019, the Commission for Conciliation, Mediation and Arbitration (CCMA) revealed that 80% of its cases were from small businesses.

This statistic highlights the significant legal and compliance challenges faced by SMEs - challenges that can lead to costly financial setbacks for businesses.

Too often, SMEs fall outside of compliance not due to negligence but simply because they are unaware of essential legal requirements involved in running a formal business.

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This lack of awareness can expose them to unnecessary risks and hinder their growth potential.

While large companies have the advantage of access to specialist in-house counsel, most SMEs scrape by with minimal resources, seeking advice from unverified online sources, or well-meaning friends or family.

This approach can lead to difficulties that impact profit, spark internal disputes, or even threaten the business's survival. It is necessary to be aware of these traps and to steer clear of them to succeed in the long run.