Every business has to make legal considerations on a daily basis, regardless of what industry they find themselves a part of. For small businesses and start-ups, legal considerations can often determine whether or not the company can achieve growth potential. Therefore, accounting for legal risks should be one of the fundamental characteristics of a small business’ enterprise risk management (ERM) strategy. Here are four legal risks that your ERM strategy must account for in order to safeguard your business.
Choosing your ownership structure
Choosing your ownership structure shows how businesses face legal risks before they even begin to operate. That’s why choosing the right ownership structure is such an important decision for businesses. This decision will impact whether or not you’ll be able to accept investors as well as how many and what types of investors. Your ownership structure will also influence whether you’ll be able to easily sell your company, what your personal legal liability will be and what your tax liability and benefits will be.
Litigation is something that almost each and every operational business will have to deal with at some point. It is also something that can cost businesses a lot of money. For small business and start-up owners, legal fees can have a crippling effect on the company’s finances, often more so than actual settlements may demand. While juries tend to be sympathetic towards small businesses, the risk and cost of litigation is hardly ever justified and is something that should be avoided at all costs.
How do you avoid litigation? Seeking legal advice before you make any important business decisions that could lead to litigation can certainly help. Which brings us to our next point..
Failing to seek legal consultation when necessary
It’s only natural for small businesses and start-ups to avoid hiring an attorney in order to reduce legal costs. However, without appropriate legal advice, you run the risk of making decisions that could negatively impact on the business such as entering into legal agreements that don’t fully protect your interests. These failed decisions could end up costing the business much, much more than any legal consultation would. By failing to seek appropriate legal advice when necessary, your business may become threatened in the long run.
Ignoring Intellectual Property
Intellectual Property law is a complex area that is often avoided by small businesses, especially non-tech businesses that believe that they don’t face any intellectual property risk. However, failing to account for intellectual property and intellectual property insurance will leave your rights unprotected when it comes to the ownership of original ideas. This has the potential to significantly damage the future success of a small business, whether they realise it or not.
If your business is constantly experimenting and creating new technologies/processes that are unrivalled and eligible for patent, you may want to amend your employment agreements so that they clearly specify ownership of intellectual property. This can prove critically important when it comes to potential investments, particularly if you end up licensing your trademark to another company.
Legal matters may strike some small business owners as the itch that cannot be scratched, however, it is important to safeguard your business on an ongoing basis so that emerging legal implications are acknowledged and mitigated. By reviewing your risk management strategy and amending policy so that legal risks take focus, you can ensure your small business or start-up can become a success.
Small Businesses face many risks on a day to day basis but you can ensure the safety and future of your Business with a free risk assessment today.