Business Law Myths Debunked: Small Business Owners Should Know

Running a business is tough enough without legal misconceptions getting in the way. Unfortunately, there are plenty of myths out there that can create a false sense of security - or worse, leave your business vulnerable. Let’s debunk some of the most common business law myths I see among small business owners in Oregon and Washington.

Myth 1: “An LLC Protects Me From Everything”

Forming an LLC is an excellent step to protect your personal assets, but it’s not a magic shield. If you mix personal and business funds (say, paying your personal mortgage out of your business account), fail to maintain proper records, or personally guarantee a lease, your liability protection may be pierced.

For example, a small catering company formed as an LLC but didn’t keep a separate business bank account. When a client sued over food poisoning, the owner’s personal savings were at risk because the court treated the LLC and the individual as the same. Think of your LLC as a strong umbrella - it works, but only if you actually open it when it rains.

Myth 2: “Verbal Agreements Are Just as Good as Written Contracts”

Technically, yes, verbal contracts can be binding. But try proving what was said months later when memories fade or circumstances change. A handshake deal to provide monthly marketing services at $500 could quickly spiral into a dispute if the client insists they agreed on $300.

Written agreements clarify expectations and protect relationships. They answer the “what, when, and how much” so you’re not left arguing later. Without one, you’re essentially leaving your business to a game of “he said, she said.”

Myth 3: “I Don’t Need a Contract With Friends or Family”

Many entrepreneurs start businesses with people they know and trust, but skipping a written agreement is a recipe for conflict. In fact, I often see the worst disputes between friends or family members, precisely because expectations weren’t spelled out at the start.

Imagine starting a bakery with your cousin - she thinks she’ll own half the business, but you view her as more of a silent investor. Without an operating agreement, the fallout could end both the business and the family relationship. Having it in writing doesn’t make you less trusting—it preserves the relationship by preventing misunderstandings.

Myth 4: “Copyrights and Trademarks Are the Same Thing”

They’re related, but not interchangeable. Copyright protects creative works like photos, writing, or music. Trademarks protect brand identifiers like logos, slogans, and product names.

Here’s an example: your bakery’s cookie recipe (if written down) is protected by copyright; your bakery’s name and logo are protected by trademark. If you confuse the two and only protect the recipe, a competitor could still start using your bakery’s name in Oregon, leaving you scrambling to defend your brand.

Myth 5: “I Can Just Use Any Online Template for Legal Documents”

Free online templates might look professional, but they often leave out state-specific requirements or clauses tailored to your situation. For instance, Washington has strict rules about non-compete agreements, and Oregon recently changed its laws around overtime exemptions. A generic template won’t capture these nuances.

One client once came to me after using an online lease template for their small office space. It didn’t include a provision for maintenance responsibilities, and when the HVAC broke down, they were shocked to learn they were on the hook for thousands in repairs. What saves you money upfront could cost far more down the line.

Takeaway: Get Informed, Stay Protected

Business success doesn’t come from avoiding legal matters - it comes from understanding and addressing them head-on. By spotting myths before they cause trouble, you’re already one step ahead.

If you’re a small business owner in Oregon or Washington and want to make sure your legal foundations are strong, let’s connect. A little proactive planning today can save you a lot of stress tomorrow.

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This article is a service of Dolev Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life & Legacy Planning Session,Ⓡ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.