Why Doing Business Informally Can and Will Cost You

Founding and running a business is exciting. There is always so much to look forward to. Sure, “CEO & Founder” sounds like a great title. It goes a long way in rubbing one’s ego. All the same, I hate to break it to you–a fancy title can only go so far unless you have the knowledge and skills needed to fulfill the obligations that come with it. 

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Doing business casually/informally is one of the gravest mistake you will make. While one must always start from somewhere, granted limited resources, it is a good idea to formalize things as much as possible. It will not only make it easier to scale your business in the medium to long term but also protect you from legal contingencies that may arise. Here are some points of consideration for you:


Register and/or license your business

As basic as it sounds, most business founders don’t bother to register their businesses at inception. While some fail to do so out of ignorance, most are unsure–even skeptical–about the survival of the business in the long-term, hence they opt to “test the waters” first. Failing to register a business could cost you in various ways, including:

  • landing you on the wrong side of the law for operating an unregistered business;
  • being sued for trademark violation in the event you ignorantly use a name or logo that violates a registered trademark…or even in the event that someone notices your business and rushes to register the name and then sue you;
  • hindering you from accessing funding.


Register trademarks and other intellectual property

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You’ve probably heard the saying “the law is an ass”. And it is indeed. It can never be relied upon to be sensible. The extent of its fairness goes as far as whatever is written on paper. So, if you have a great innovation, be sure to protect it before making it public because if contested, whoever bears the title to something is the rightful owner in the eyes of the law.


Draft and sign contracts and agreements in your dealings

Keeping in mind that the law is an ass, protecting your business’s interests in any dealing is key. From signing non-disclosure non-compete agreements with partners and other people and businesses that will need to handle your business’s sensitive information to having your employees sign employment contracts, every such carefully considered action keeps you farther away from legal suits.


Safeguard customer data

Data protection

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With more and more people increasingly becoming concerned about their privacy and most every business interacting with its customers online, failure to invest in customer data protection puts you at risk of incurring heavy fines. Beyond protecting yourself from such fines and legal contingencies, it is still a good practice to make full disclosure of:

  • how you collect data about all people who interact with your business on various platforms;
  • what data you collect, both directly and indirectly;
  • how you store and manage such data to ensure its security;
  • whom you share the data with and why; and
  • the rights of a data subject.


No matter what stage your business is in at the moment, there is always so much more room for improvement. Of course, it is easy to panic when you read an article like this one while having not accomplished any of the points mentioned but as I have mentioned time and again, the important thing is getting started. And the best time to get started is now.

So, what other important points of considerations do you think I should have included in this article? Let me know in the comments section below.

Robert Kamaru

Robert is a freelance writer, blogger and e-preneur. He is interested in all issues mental health, lifestyle and online business.

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