How to Legally Protect a Small Business

How to Legally Protect a Small Business

Small business owners have many responsibilities since they wear multiple hats. An important obligation is to safeguard your enterprise. Additionally, to minimize the likelihood of being sued by a third party. Irrespective of how busy you are managing your organization’s daily operations, you must set aside time to avoid future business litigation that could jeopardize its long-term viability.

No business is run the same, and policies may vary depending on the nature of the company. For example, a clothing store may not have to worry about providing auto insurance, but a trucking company would have to invest in that.

Make sure to think about the needs of your business before attempting any of the suggestions below. 

Although no business is safe from legal troubles, there are numerous techniques to minimize the likelihood of a company being sued. Consider the needs for certain businesses structures before deciding on which changes to implement. To protect your small enterprise legally, consider the following:

Select the Appropriate Business Structure

Select the Appropriate Business Structure

Operating a sole proprietorship isn’t always the optimal business structure for most entrepreneurs when protecting their company from legal action. It’s critical to choose the proper business structure that protects both your business and personal assets.

Generally, the sole proprietorship business structure is incapable of protecting your assets in the event of a lawsuit. This means that if an entity sues your small business and wants payment, but your organization’s assets are insufficient to meet the demand, the plaintiff may seek payment through your savings and other assets.

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Therefore, if you want to avoid jeopardizing your assets and business, choose the appropriate structure, such as founding a limited liability corporation (LLC). In this manner, it’s possible to rest easy knowing the business is secure from legal liability.

The requirements to form an LLC are not extensive or difficult. They include choosing a name, hiring a registered agent, and filing Articles of Organization. An agent must be a resident of the state your business resides in.

They are a third-party individual who will handle any government or legal interactions your company has with others. There are organizations you can hire to handle the entire process for you. 

After that, you have to file a public notice of your intent in a local paper. You have to publish the notice 7 times before completing the next step.

After that, you and your agent can file the articles of organization. After successfully filing papers, the remaining steps are yearly fees and reports. Usually to the government. 

Do Research on the Critical Business Laws

Another strategy to legally protect your small company is to gain an in-depth understanding of the pertinent business laws. However, unless you are a legal specialist, you may require the advice of an experienced attorney to assist you in explaining the following business laws:

Intellectual Property: If your business owns intangible assets such as designs, innovations, logos, or brands that differentiate it from competitors in the market, be careful to register them to prevent others from utilizing them. This way, the brand is protected in the marketplace.

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Employment and Labor: Recruiting and managing staff is a difficult task. If employees believe they aren’t being treated fairly, it could lead to costly lawsuits against your company.

To avoid this, you should be familiar with the local employment and labor regulations. These can include workplace safety, workers’ compensation, medical and family leave, civil rights, and labor relations.

To learn more about this topic, contact knowledgeable L&I Seattle Attorneys if you live in Washington. Otherwise, contact local attorneys to learn more.

False advertising or deception in marketing and advertising can lead to company litigation. And so, understanding the regulations governing advertising and marketing is critical. You must be aware of legal requirements to avoid getting into problems.

Make Use of Written Contracts

When dealing with individuals, trusting their statements may not be the best option. It may cause a disagreement between you and them. If this occurs, it costs a significant sum of money to resolve the issues and strain your relationship with business associates.

To avoid costly conflicts and litigation, ensure that all contract terms are agreed upon between both parties and create physical copies of written contracts. It will be much easier to address any issues by looking through the contract’s clauses.

If you don’t know how to write a contract, you can look up templates online and draft one based on a pre-existing template. Make sure you both have a physical or digital copy of the contract. 

Company Insurance

Your business should obtain insurance to protect both of you from liabilities. For instance, if a client is harmed due to a slip and fall, you can acquire liability insurance to protect your business from a premise liability lawsuit. Also, if a client accuses you of breaking a contract or making errors, you should purchase omissions and errors insurance to defend your small business legally.

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The most common types of insurance for a small business to get include General Liability Insurance, Professional Liability Insurance, Workers’ Compensation Insurance, Employment Practices Liability Insurance, and Business Income Coverage. There usually will be an insurance package that will combine the most necessary insurance types. 

In addition to purchasing insurance, it is a good idea to include liability protection terms in your contractual arrangements. One example of this is if an act of nature renders it impossible to fulfill a contract, you should not be held liable for any unfinished work as a result of this factor.

Hiring a competent attorney to get this done properly is an excellent option. They can assist you in incorporating legal clauses that will protect your business from any legal issues that may arise.

Final Thoughts

Business owners are accountable for defending their enterprise against a variety of legal challenges. Keep these tips in mind to protect your business from anything that could jeopardize your chance at a prosperous future. Additionally, when you understand how to defend your organization from start to finish, you’ll be in a better position to avoid legal troubles.