Fostering a Healthy Small Business with Minimum Legal Exposure

Is your company operating in a way that ensures the least amount of legal risk is being taken? Give your business the check-up it needs to prevent any surprising pitfalls that may expose your company to substantial and costly litigation. Many risk measurement measures can be implemented immediately and, when utilized effectively, could save your company time and expenses.

Accurate Documentation

You should document all formal activities of the business through written agreements. Written agreements may serve to identify the business structure, ownership rights, profit/loss sharing, day to day operations and should provide a general framework for how your business will run. The documentation should clearly identify roles and corresponding responsibilities within the organization. The documentation of business activities should also be easily located as a reference.

Recordkeeping and retention

A common and costly issue for many businesses is failing to maintain the required records. Retention practices will vary depending upon the particular industry your organization falls under. However, you should regularly review your recordkeeping process and make sure that you are maintaining records that will be needed to defend you in the event of litigation beyond the statute of limitations period for any potential claims against you and your organization.

Employee Policy

If you have employees it is important for you to appropriately classify your employees because different rules will be applicable depending on the type of employee relationship you have, e.g. part-time vs. full-time employee, independent contractor, consultant, etc. Having policies in place that cover you and your employees will help everyone to have a clear understanding of what their rights and obligations are pursuant to your agreements or employee handbook. Also, schedule a systematic review of your workplace policies so that you’re regularly updating outdated policies and keeping current with new laws or regulations that could affect your business.

Dispute Resolution

Litigation can be expensive and the results may be often delayed. Therefore, it is important to plan for how you want to handle disputes in advance. There are ways to resolve issues that are less costly than court proceedings, such as arbitration or mediation. If your company favors an alternative dispute resolution process, be sure to include dispute resolution clauses in contracts when you are doing business so that the other party is put on notice as to how you plan to handle any dispute arising from the agreement.

Succession Planning

Now is the time to think about succession planning! Too often, business owners wait until they are faced with the unexpected to determine what their business succession plan will entail. Consider what will happen if you or a partner leaves the company or in the event of bankruptcy or death of a business partner. Succession planning is a necessary component of your business operations that allows you to take the time to carefully consider how to transfer business obligations, profits, losses, etc. in the event of significant changes within the business.

Legal Counsel

Where feasible, consider retaining an attorney for general legal questions as they arise. This will allow you to take a proactive approach to resolving issues within your organization. Identify legal counsel that is experienced in your industry so that you can address potential specialty areas that expose you or your company to legal liability and identify potential loss reduction opportunities.