Establishing your own business is an exhilarating prospect but it is also one that comes with an inherent level of risk. Unfortunately, entrepreneurs continue to face risks in their business every single day and without knowledge of an outside professional in the form of a business attorney, they may be exposed to risk on a regular basis. What follows are six common situations that put entrepreneurs at risk even if they do not realize it.
Absorbing All Personal Liability
A business structure should be selected that limits a person’s individual liability. A sole proprietorship may allow for an individual to be held personally liable whereas a limited liability company or a corporation minimizes this.
Not Conducting a Risk Analysis
A regular risk analysis can help to identify problems inside and outside of the company that should be addressed with a strategic plan. A risk analysis is a powerful process that helps to illuminate weak spots in the business. From this point, you can develop a comprehensive risk management plan to determine how to close the gap. Having outside professionals like a lawyer to assist you with this process can be extremely helpful.
Not Having Proper Agreements between Partners
A buy-sell agreement or a partnership agreement helps to establish the terms of the relationship between individuals working at a company. Without these, chaos can ensue if one partner wants to do something and the other does not agree.
Absorbing All Insurance Related Risk
Injuries to suppliers, customers, damage to the facilities or product liability can all present significant problems for a business of any size. Transfer this risk to insurance companies by purchasing affordable policies that give you peace of mind that your business will still be able to operate and recover after a significant incident.
Not Using Proper Employee Agreements
Unfortunately, employment disputes are a common cause of litigation these days. Without properly written agreements you may be exposing yourself to unnecessary risk with employees who try to take advantage of your good nature. Having employment agreements in place ensures that everyone kicks off the relationship on the right page and can also assist in the event that an employee needs to be terminated.
Not Engaging in Regular Contract Review
Contracts are the lifeblood of any entrepreneur’s business and these should be properly drafted, negotiated and reviewed on a regular basis by an experienced business attorney.
Disclaimer: The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from McElfish Law Firm or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.