As a business owner, you may often find yourself overwhelmed by the different roles you have to play to keep your business running. In most cases, however, business owners tend to forget one of the most important things that help keep a business running: preparing for the unexpected. You never know when something can go wrong and get your business in trouble, especially when it comes to legal matters.
And while the last thing any business owner wants to hear is that they’re getting sued, it’s essential to prepare for any legal troubles you might encounter while running a business.
Here are some of the common legal issues small businesses may face and how entrepreneurs can protect their businesses from lawsuits:
Legal Situations Small Businesses May Encounter
Choosing the Wrong Business Structure
Choosing your business structure or entity is one of the many big decisions you need to make before running a business. Making the wrong choice can lead to significant consequences that can affect you and your business in the long run.
The kinds of business structures you can choose from include:
- Sole Proprietorship
- Limited Liability or LLC
Each structure has its advantages and disadvantages, which is why it’s essential to study each business structure carefully so you can make the right decision for your business. However, it may be best to steer away from making your small business a sole proprietorship, as it can lead to significant problems if someone ever decides to sue your company.
Licensing is a common legal issue that many business owners encounter, but not many know about. Whether you own a small business or a corporation, your business must follow the licensing rules and regulations of the company’s state. By doing so, not only will you be able to avoid any penalties or additional fees, but customers will feel more at ease transacting with you and knowing that you’re running a licensed business.
Many small businesses, especially startups, tend to suffer from employee-related issues regarding hiring and firing, salary agreements, injuries in the workplace, and more. One of the most common mistakes business owners make when starting a business is hiring employees without a valid contract. While this makes things more accessible at the beginning of a job, if any disagreements arise between you and your employees, it may lead to serious litigation about wage and salary violations, employee injury due to employer ignorance, and even wrongful termination.
Next to employees, customers are the backbone of a business, often determining whether or not it becomes successful. However, they can also be the source of many legal issues. They can sue for various reasons, from sustaining personal injuries while on your property to feeling unsatisfied with a product or service that your business offers.
Both employees and customers can sue based on discrimination based on age, sex, religion, or race, which are sensitive topics nowadays. Discrimination can also fall under two categories: direct and indirect.
Direct discrimination refers to being treated less favorably due to a protected characteristic (disability, age, race, religion, sex, sexual orientation, gender reassignments, pregnancy, marriage, and civil partnership).
On the other hand, indirect discrimination occurs when a policy that applies to everyone is put in place but puts a particular group of people at a disadvantage due to a protected characteristic.
Due to the rise of the #MeToo movement, harassment in the workplace and establishments have been highlighted in both good and bad ways. The campaign has shed light on a long-standing issue in many companies, with those in power taking advantage of the powerless. Still, it has also shown how some people with ulterior motives can easily take advantage of people’s sympathy.
How You Can Protect Your Small Business
No matter how customer or employee-friendly your business may be, you can’t control how an employee or customer may feel towards you or your business. With this in mind, it’s essential to take action to avoid any legal inconveniences that can get in the way of you running your business.
Be Mindful of Your Words and Actions
At a time when a simple social media post can make or break a business, maintaining your business’s image and avoiding making promises and claims you can’t back up are as important as ever. You never know when someone could be recording what you’re saying and doing, so refrain from doing anything that could get potentially get you in trouble.
In the workplace, consider drafting clearly stated policies in an employee handbook that can help promote a healthier work environment for everyone in the office.
Don’t Operate as Sole Proprietorship.
Marking yourself as the sole proprietor of your business can be problematic and expose you to personal liability. This means that if someone decides to sue your company, your assets can quickly be involved in the court of law.
Consider investing in liability insurance that can protect you from claims resulting from injuries and property damage and protect your company’s assets. Liability insurance also pays for any medical costs, legal defense, and settlement offerings agreed on by both parties. In addition to this, you can also consider contractual liability insurance that states that either party agrees that the opposite party will not be held responsible for any accidents, losses, or injuries that occur while the contract is in effect.
Have Competent Legal Professionals On-Call
Legal issues and inconveniences can cost you money as well as your business’s reputation, which is why it’s essential to seek the help of an attorney who can provide legal counsel when you need it. Before you find yourself entangled in a legal issue, a business needs to have legal counsel on call. While they can help with any legal issues you may come across, they can also help provide legal advice, help you understand contracts, review documents, and assist with contract negotiations, among other things.
In these uncertain times, with the global health crisis and unstable political and social climate, business owners need to take caution at all times when it comes to their businesses. Even small businesses need the necessary protection from any possible lawsuit claims from employees and customers alike. As long as you think ahead, are cautious with what you say and do, create a healthy environment for both customers and employees, and have competent legal counsel on your side, you won’t need to worry.