Running a business requires a great deal of hard work, no matter what its scale and size is. Even as a small business owner, you have to juggle between diverse issues. You need to keep the operations running smoothly all the time while ensuring that the employees are productive and happy. At the same time, you have to make sure that customers are happy so that you are always ahead of the market competition. There are other challenges like regulatory compliances, changing market conditions, and modernization requirements to deal with.
Things can get chaotic with so much to keep track of and the last thing you would want to encounter is a legal hassle. However, it is easy to get into something troublesome and one mistake could lead to a lawsuit ending with you receiving a subpoena from the SEC. A court battle can bring major financial expenses and even damage your reputation. It makes sense to stay one step ahead and manage legal risks. The best approach would be to stay aware and prevent them in the first place. Here are the most common legal risks which every small business owner should avoid.
Legal risks for a small business start with the ones related to contracts. You can expect to face them right from the stage of inception when the absence of proper contracts between founders can lead to issues. Further, you may end up in a fix due to breaching of contracts with employers, vendors, and third-parties you deal with. Similarly, employee contracts are another area of legal risk.
There are chances of financial losses when you fail to adequately manage the obligations of the contract. It becomes important to have a proper contract management process in place so that you can understand the exposure to risks. Proper legal advice and guidance for preparing contracts become essential to steer clear of these risks. Following the contractual clauses is equally important.
Personal injury disputes
Personal injury disputes are perhaps the most common forms of legal risk that a business may encounter. Essentially, these cases come up when someone files a legal claim against your business, holding it liable for an injury sustained due to negligence. These cases can be complex and expensive as the business often has to pay high-value compensation if the injured party is able to prove their liability.
There are different types of personal injury claims, including those involving premises injury, product liability, workplace accidents, and even accidents with business vehicles. You may have to pay even if the mishap happens due to an employee’s negligence. For example, a car accident lawyer can help a victim to recover compensation under vicarious liability if they are injured in a crash with a business vehicle. Avoiding such claims is vital as it can get you bad publicity and tarnish your reputation for good.
Another risk that small businesses need to be careful about is about following regulatory compliance enforced by the authorities. Commissions, agencies, and governments often enforce generic and industry-specific regulations for businesses that they have to follow to operate smoothly. For example, there are regulations related to employee health and safety that every organization has to follow.
Similarly, some industries have to abide by data privacy regulations that require them to safeguard the confidentiality of customer data. Not following these regulations opens the possibility of lawsuits for your company. Apart from abiding by these rules, you need to keep up to date with the changes which happen more often than you expect.
You cannot seek relief by showing a lack of awareness.
Assets and property
Another legal risk that a small business owner cannot ignore relates to assets and property. While these risks relate to tangible assets such as buildings, plant, and machinery, they also cover intangible ones such as intellectual property. Taking adequate measures to protect these assets should be your top priority. You also need to go the extra mile to protect your digital assets from cybersecurity risks.
Small business owners often believe that intellectual property matters only for large corporations and technology companies. That’s a myth because the loss of valuable trade secrets and branding assets makes you lose your edge in a competitive market. Not taking it seriously enough can lead to massive damage and you may even end up with extended legal battles to get back the rights to your intellectual property.
Considering the seriousness of these legal risks, small business owners need to be extra conscious about them. A legal expert on board can be a real savior when it comes to steering clear of these issues in the first place. Having the right strategies to deal with them can make all the difference.