We live in a world where data breaches, cyber threats and broken contracts seem like the norm. And as frustrating as it can be to constantly be on guard, it’s something you have to deal with on a daily basis. By pursuing different legal protections, you can give your company a head start and lower your risk of getting caught in complicated battles.
Five tips to help you protect your business from legal issues
Nothing will halt your business in its tracks quite like a serious legal matter. Even if you’re totally in the clear, you still have to defend yourself against allegations and expend money and energy to get out of the precarious matter. So it’s far better to prevent legal issues and challenges from emerging in the first place. In an age where data can get you in trouble, here are a few specific things to keep in mind:
1. Set up the right entity
When starting a business, one of the first things you need to do is establish a legal “fence” around your operations. By separating the business from your own personal assets, you can limit your liability and lessen the likelihood of a professional crisis becoming a personal crisis.
For most small businesses, an LLC is the ideal choice. Every US state has its own unique set of LLC laws and stipulations, but they all have the same basic principles. Take Delaware as an example. When you start an LLC in Delaware, you get several benefits, including:
- Quick, easy forms to start a business in hours or days.
- Limited personal liability – keeps all debts and obligations separate from your personal finances.
- Easy to maintain – no board of directors or annual meetings required.
- Simple taxes that make it easy to report LLC income on a personal tax return.
If you don’t feel an LLC is best in your situation, you may also look into an S-corporation or partnership.
2. Maintain proper records
Being meticulous with the information you document, as well as how you store it, is crucial to protecting your business and staying above reproach.
“Verify that the organizational documents are in place,” Business Bank of Texas suggests. “Your business is required to create and maintain proper records including such items as adopting resolutions documenting business decisions, paying payroll and taxes, maintaining the company’s bookkeeping, complying with federal and state labor, safety and wage requirements, and acquiring and maintaining licenses or permits.”
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3. Use written contracts
If you don’t already know, you’ll learn pretty quickly just how important it is to have agreements in writing. Words are cheap and the only way to fully protect your business is to have contracts written out. (This includes non-disclosure agreements, contracts with employers, contracts with suppliers, etc.)
Written contracts are important for many reasons. For one, they provide concrete proof of details. But even more importantly, they prevent misunderstandings from arising when details of the contract are executed.
4. Prioritize IP trademarks
In an age of data breaches and cyber theft, few things are more important than trademarking your intellectual property. It gives you an extra line of defense against those who may seek to infringe upon your IP, while also providing much-needed peace of mind.
Whether it’s a copyright, patent, or trademark, be sure to speak with the appropriate individuals and get the correct advice on how to proceed. A simple oversight here can cost your entire business down the road.
5. Get legal advice
The best way to avoid getting into legal hot water is to have the right experts on your team. Specifically, you need an experienced attorney helping out with any legal matters.
“Don’t wing it. If you're not clear on the terms of a new contract you’re about to enter into, have a lawyer read and interpret the document to you,” entrepreneur Ayodeji Onibalusi writes. “While you might be very eager to append your signature to the agreement, taking a little caution will keep you from entering a long and painful business relationship.”
When you’re small, you can get away with working with an outside lawyer on an as-needed basis. As your business grows, you should think about bringing an experienced attorney in-house to ensure you’re constantly staying on top of legal issues before they become high-risk problems.
Adopting a proactive approach to security
As much as you may like the idea of keeping your head down and minding your own business, you have to consider the various legal challenges and security risks that a company like yours will inevitably face in today’s marketplace. By being proactive, rather than reactive, you can preemptively keep your business out of trouble and increase your odds of enjoying long-term success.