When owning or managing a business, there are many legal aspects and risks to navigate from contracts to employee protections. Businesses must mitigate as many legal risks as possible to avoid lawsuits, fines, and potential shutdowns. Owners, managers, CEOs, and other leaders must familiarize themselves with all aspects of business law to maintain an industry standard that is ethical, legal, and straightforward. What are these risks and how are they best quelled?
Types of Business Legal Risks
Businesses must operate legally and ethically. Contracts must be binding and legal, employees must be treated and compensated fairly, and all finances must be properly reported and filed. There are many aspects to businesses, and therefore many types of legal risks.
Contract Risk
Contracts are legally binding documents that define policies, relationships, or procedures within a business. Contract risks arise when there is a problem within a contract. Contracts can be breached, create financial issues, be subjected to privacy laws, and affect operations. For example, an employee contract can be breached when employees are paid less than the contract dictates.
Regulatory or Policy Risk
Changes in business regulations and laws can present a regulatory risk if your business doesn’t adapt to these changes accordingly. A simple example would be a change in customer data privacy laws; if your company does not adhere to these new changes, it can cause fines, jail time, or even close your business.
Litigation Risk
There is always a risk that a business or individual within a company will face legal action, such as a lawsuit. This is known as litigation risk. This can be as simple as a customer sustaining an injury on business property and filing a personal injury lawsuit. It can also be complicated, such as legal action against a CEO for embezzling business funds.
Mitigating Risks
While it’s common for businesses to face legal risks regardless of countermeasures, there are some infallible ways to significantly reduce the legal risk that businesses and brands face.
Hire Legal Teams
Your business must have counsel. Hiring at least one lawyer or legal team can help you identify any risks prevalent in your current business operations and how to reduce them. Lawyers have specializations in contract law, personal injury, worker’s compensation, tax law, and more to cover all types of risk. You’ll want to hire a team in the same state that your business operates. For example, a Miami business would likely not benefit from a New York legal team. A Chicago company, however, would ideally look into hiring a Chicago personal injury law firm to help mitigate lawsuit risks.
Study All Contracts
Contracts need to be very carefully crafted and worded before sending. Any contracts received to sign need to be meticulously studied, preferably by multiple parties, especially lawyers specializing in contract law. This reduces not only legal risks but can help a business from losing profits as well.
File Taxes Correctly
Taxes must be calculated and filed accurately and on time. This includes meeting any quarterly tax deadlines. All profits and income must be reported, receipts must be on file, and deductions need to be above board. Ideally, businesses need to hire specific payroll and accountant teams for this. Having a tax law attorney on hand is also incredibly beneficial.
Stay Up to Date
A business that stays up to date on data laws, privacy laws, and other business policy laws will keep itself out of legal trouble. If a business is not easily adaptable to regulatory change, it can create a major legal risk. Hired professionals can keep track of changing laws and regulations and adapt business policies to reflect those changes.
Industry Standard Business Conduct
Maintaining an industry-standard ethical business is key to mitigating legal risk. While many ethical and legal companies face legal consequences once in a while, the fallout is minimal when businesses operate above board. Any illegal or unethical practices will eventually come to light in one form or another.
Handling Legal Issues in the Workplace
Regardless of how well a business handles risk mitigation, litigations may still arise for many reasons. When this occurs, you’ll want to ensure you’ve hired a local, qualified attorney or legal team to provide the best course of action. Follow all legal procedures and laws appropriately and timely. Be certain to keep evidence and records of all conduct for evidence and reference.
Conclusion
Legal risks in the workplace can never be eliminated, but they can be significantly reduced with proper mitigation. Hiring legal experts or teams can help a business navigate any changing policies or contracts with ease. Thoroughly examining all incoming and outgoing contracts, adapting to new business regulations, and handling finances legally and timely can minimize litigations. If legal problems do arise, be certain you have counsel and follow all procedures legally.