Whether you plan to sell crafts out of your garage on the weekends or to start a multinational corporation, there are a few tips that will apply to each and every business owner to help avoid unnecessary litigation. Litigation can be time-consuming, frustrating, distracting, and most importantly expensive and damaging to a company’s goodwill.

Many times the cost to defend litigation is more than the cost that is in dispute.

Below is a simple list (in no particular order) that every business owner should follow:

If you have any questions after reading this article, please give us a call for your FREE consultation.

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1. Even if you plan to work as a sole proprietor or a general partnership, create an LLC or LLP to protect your personal assets

Just because a sole proprietor or a general partnership can immediately open up their doors to incoming business on day one, does not mean that they should. By taking simple steps of forming a limited liability company (LLC) or limited liability partnership (LLP), sole proprietors and partners can separate themselves from the liabilities of the company.

For more information on the advantages of LLCs and LLPs, click here

2. Know the basic laws that affect your particular industry

Seems simple, but this causes many businesses to fail because they did not do their homework. Do not rely on friends or family members to give you advice on the “Do’s and Don’ts” of business if they are not licensed professionals.

Further research is also needed if you plan to do business over state or international borders as taxes, customs, and regulations can vary for each locality on which you plan to do business. 

3. Even if you do not have a storefront, that does not mean business laws will not apply to you

Gone are the days of the early 1990s where business operations on the internet were akin to the wild west. Internet compliance laws exist and are enforceable against improper business behavior over the internet. Furthermore, recent court precedent has also held that publicly-accessible websites must be compliant with the Americans with Disabilities Act (ADA), which requires public spaces, such as websites and other software programs, to be accessible by those with disabilities.

If you have been served with an ADA website compliance complaint, speak with a business attorney today.

4. Avoid conflicts of interest

Now that you are a business owner, be wary of your continuing, active involvement in certain types of boards, memberships, councils, and/or associations as they all have the possibility to create a conflict of interest with your business, whether that was your intention or not.

Additionally, if your business is your “side hustle” away from your regular 9 to 5, be cognizant of whether operating a company in your free time conflicts with your employment agreement and/or employee handbook.

While this type of conflict may not result in litigation, it may very well result in early termination from your employer. 

5. Put Everything in Writing

The only way to ensure the agreements that you have are legally enforceable, whether with an employee, client, or vendor, is to reduce them to writing.

Far too many problems arise when there is nothing documenting the agreement between parties resulting in a “he said, she said” situation.

Properly constructed agreements can set out important terms and conditions, course of conduct and performance between the parties, required levels of communication, alternative dispute resolutions, damages in event of breach by either party and much more.

Simple forms such as order confirmations can be obtained online for free.

However, more complex documents such as investor agreements, purchase agreements, indemnity agreements, employment agreements, employee handbooks, independent contractor agreements, non-compete agreements, non-disclosure agreements, bills of sale, security agreements, franchise agreements, stock purchase agreements, and equipment or property leases should all be created, or at the very least be reviewed by an attorney. 

6. Read Every Agreement

While all of us may be guilty of not reading the “terms and services agreement” for every product we purchase in our lifetime, properly reading and analyzing each and every business contract and agreement could be the difference between your endeavor being a success or failure.

In the event of a possible future conflict, the terms of the agreement between the parties will govern no matter how one-sided the terms of the agreement may appear. The law presumes that the terms of the agreement were properly negotiated for and agreed to unless a party can prove otherwise.

Unfortunately, ignorance of the law is not a defense.

Failing to read an agreement can cause you to be bound to horrible terms that you never intended to agree to. 

7. Be properly insured

You have insurance for everything else in your life that has risk, why would you not insure your business? While costs can be preventative at the onset, insurance is not something you want to allow to fall by the wayside.

Business insurance policies can be tailored to fit your specific business needs, which can include coverage for settlements for disputes without having to see the inside of a courtroom. 

8. Protect your business records

Most company records are either digitally or online through some cloud-based storage system. Get into the habit of securing your computers with the same diligence as you would physical copies. For many companies, their computers are their lifeline and most precise business asset.

Do not lose precise time and money trying to fix a virus or bug on your computer system.

Even worse is if personal information is either lost or stolen due to a cyber-security breach. Use protective software such as antivirus and backup your files to secure cloud-based storage in the event of a computer malfunction. 

9. Plan for the future

How many days would your business survive if something were to happen to you? Do you have business succession measures in place? Are there either family members or employees trained and qualified to continue the business in your absence?

These are all questions to think about to prevent the dissolution of the business in your absence. Having proper business succession plans in place prevents unnecessary litigation between possible business successors in the future. 

10. Consult with a business attorney

An attorney can help your business with creation, formation, taxes, online market, and compliance issues, continuously help your business avoid litigation, and much more! Most businesses only seek the guidance and advice of counsel until it is already too late.

Many serious business-related conflicts could have been avoided with proper representation from the onset saving significant costs, frustration, headaches, and time. Besides getting you out of trouble, business attorneys can also be there to provide advice regarding your day-to-day business practices. 

Contact the Finity Law Firm today to learn more of the benefits of hiring a business attorney. 

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