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How to Legally Protect Your Business and Why It's so Important

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As a business owner, you've got a lot on your to-do list every day: Sales and marketing, accounts payable and receivable, taxes, payroll, inventory, and customer satisfaction, to name just a few. You've invested a lot of time, effort, and money, so the last thing you need is the threat of losing it all due to a potentially devastating lawsuit. Learning how to legally protect your business is critical to ensuring its continued success.

 

Avoid the Courtroom Drama

Even if you've never set foot inside one, you've surely seen them in the movies. Courtrooms can be intimidating, with their formal proceedings and participants, including the judge, attorneys, bailiff, court reporters Sacramento, and others. The best way to avoid having to make an appearance yourself is to legally protect your business from the beginning by taking the actions outlined below.

 

Select the Right Framework

Perhaps the most fundamental decision you'll make is which legal business structure to use. Choices include sole proprietorships, partnerships, and various forms of corporations. There are pros and cons to each type, but some of them, such as a sole proprietorship, may leave you personally financially exposed if there are claims against your business. On the other hand, establishing a corporation may protect your personal assets but requires a more complicated process to establish.

 

Each option carries different legal and tax considerations, so the choice should not be made lightly. Thorough research and perhaps a consultation with a qualified attorney will help you select the appropriate business entity based on your individual circumstances.

 

Ensure Peace of Mind

Let's face it, insurance is one of those unexciting yet necessary aspects of life. You're paying for something you'll hopefully never need. But if one day it is required, you'll be glad to have paid all those premiums. Because every business is unique, there is no cookie-cutter formula for what type and how much insurance you should have. Some of the possibilities are general liability, professional liability, worker's compensation, and commercial auto insurance.

 

While you may be tempted to skimp on purchasing insurance, consider the fact that accidents, by nature, happen when you least expect them. A customer could trip and fall on your premises. An employee could cause an accident while driving a company car. Having adequate insurance in place will help ease the stress and trauma of dealing with whatever type of emergency comes your way.

 

Protect Proprietary Information

No matter what business you're in, you most likely maintain some or all of its pertinent information on a computer. That data could include your customers' personal information which, if hacked into and stolen, could lead to massive legal problems. Your business may involve intellectual property or trade secrets such as a unique recipe or design. If so, you need to protect these intangible assets from falling into the hands of your competitors. Be vigilant in maintaining up-to-date antivirus and other computer security software.

 

On a related note, make sure you maintain back-up copies of all files, preferably in a physical location that is removed from your normal place of business. Otherwise, a technological failure or natural disaster could wipe out all your records, leaving you unable to operate and potentially at risk of being sued.

 

Get it in Writing

If a dispute ever escalates to the level of legal action and court hearings, a written contract will be your greatest ally. Contracts lay out the expectations and agreements approved by both parties, so you should enter into one with every individual you do business with. This includes your customers, vendors, employees, and contractors. Keep in mind that, in a dispute, a written contract trumps a verbal agreement. If you agree to any amendments or changes to an existing contract, be sure to put it in writing and get signatures from everyone involved.

 

When it comes to contracts with employees and independent contractors, be sure to outline what types of behavior are unacceptable and could lead to termination. Issues to consider include confidentiality, conflict of interest, and unethical behavior. Your employees and subcontractors are your representatives in the community. Make sure they understand how you want your business to be perceived and that you expect them to act accordingly.

 

If your business involves providing a service, be sure to include clauses in your contracts with customers that release you from liability in the event services cannot be rendered due to forces beyond your control. For example, you would not want to be sued for breach of contract if a public health crisis such as a pandemic forced the temporary closure of your business.

 

Your business is your livelihood and it's up to you to protect it. Taking the appropriate steps now to ensure that you and your assets are protected against legal action will go a long way toward keeping your business healthy and prosperous for years to come.

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