Running a business comes with inherent legal risks. Lawsuits, fines, and other legal troubles can arise from employee issues, customer injuries, contract disputes, and more. While you can't eliminate legal risks entirely, you can take proactive steps to shield your business. Doing so will protect you from costly legal problems down the road. This article outlines key ways you can legally safeguard your business interests.
Hiring a Qualified Attorney
One of the best protective measures is hiring an attorney to advise your business. Look for lawyers with experience in your industry and location. Make sure any attorney you consider has graduated from an accredited law school. Today there are even good online schools for law that issue valid JD degrees. Vet qualifications thoroughly before bringing an attorney on board.
A reliable lawyer acts as your legal watchdog. They can review contracts and agreements to catch issues before you sign. Attorneys also keep you updated on new regulations and legal obligations in your region. If a lawsuit does arise, your lawyer defends your interests in court. Paying for attorney services upfront saves you money over dealing with legal troubles later on.
Structuring Your Business Appropriately
How you legally structure your business also impacts liability. Options like LLCs, corporations, and S-corps better shield your personal assets from the business. Compare entity types and choose one that limits financial exposure.
Additionally, don't comingle personal and business funds. Keep business finances strictly separate. This makes it harder for plaintiffs to go after your personal wealth in a lawsuit.
Working with a lawyer ensures you form the right business entity upon launching. Periodically review your structure as the business grows and laws evolve. Update your legal business structure to keep liability protection intact.
Handling Employees Carefully
Employees can spark various legal issues like discrimination suits, sexual harassment allegations, wrongful termination lawsuits, and more. Limit risks by thorough screening during hiring. Perform background checks and contact references to avoid problem candidates.
Also, an employee handbook should be created outlining codes of conduct, anti-discrimination policies, safety rules, and disciplinary procedures. Make sure to apply policies consistently to all workers. Receive legal approval before firing employees as well.
Additionally, train managers on lawful hiring, firing, discipline and performance management practices. Keep detailed documentation in case disputes arise over past decisions. Refresher training ensures managers stay compliant as laws change.
Obtaining Adequate Business Insurance
Another key shield is proper commercial insurance coverage. Work with your attorney and insurance agent to determine optimal policies and limits. Essential small business policies include:
- General liability - Protects against third-party bodily injury, property damage, slander, copyright infringement, and other claims.
- Professional liability - Covers claims of errors, omissions, or negligence associated with your services.
- Product liability - For retailers, it covers injuries and damages caused by your products.
- Commercial property - Insures your business location, inventory, and equipment against damage or loss.
Also consider commercial auto, directors and officers, cyber liability, and other niche policies per your attorney's advice. Thorough insurance transfers many legal risks to carriers. Maintain current policies as your business offerings evolve.
Using Contracts to Allocate Risk
Limit exposure through contracts with vendors, clients, independent contractors, and anyone else you do business with.
Carefully word contracts to assign responsibility and clearly outline expectations. Include limitation of liability clauses to cap financial damages. Your attorney can ensure contract terms are enforceable and shield your interests.
Before signing agreements, negotiate for favorable contractual risk allocation. All contractors are required to provide proof of appropriate insurance. Only sign contracts you fully understand. Breaching poorly constructed agreements heightens your liability.
Handling Customers Carefully
Customer incidents like falls, injuries, or data breaches open the door for premises liability, product liability, and negligence lawsuits. Train staff thoroughly on safety protocols, data security, and incident response. Follow all regulations related to your industry.
Document issues when they arise and retain proof that you addressed them appropriately. Post visible disclaimers and warning signs where applicable. Have customers sign liability waivers before engaging in any high-risk activities associated with your business.
Following Regulations Closely
Keep up-to-date on the latest federal, state, and local regulations impacting your business. Work with counsel to adjust operations and policies accordingly. Adhere to regulations related to your industry, taxes, intellectual property, data security, employment practices, accessibility accommodations, and all other facets of running your company.
Ignorance of evolving laws is no shield against stiff regulatory fines, penalties, and legal action. Make ongoing legal compliance a priority, not just when issues arise.
Running afoul of the law can cost your business dearly in terms of both money and reputation. Protect your interests against lawsuits and other legal troubles through prudent preventative steps. While no approach fully eliminates liability, staying legally proactive goes a long way in shielding your business and its future. With persistence and care, you can operate confidently, knowing measures are in place to avoid turning small legal issues into major ones.
