Business is riskier than ever these days. The economy is a mess, credit markets are tight, taxes are high – and likely to go higher, the courts are clogged with frivolous lawsuits, and attorneys seem to rule the world. What can you and I do about it? Fortunately, you can do quite a bit to protect yourself in this business environment. Here are 11 ways:
Divide and Conquer
Incorporating allows you separate yourself from your business risks, and that is critically important today. However, there may be additional opportunity to divide higher-risk business activities from lower-risk or asset-rich activities by placing these activities in separate limited liability business entities. By dividing your important business assets from your most significant business risks, you increase your protection substantially.
Get Everything in Writing.
Many business disputes result from informal contracts and agreements. Don’t rely on handshakes, and don’t wait for the other party to document the agreement. Put it in writing and have them confirm your understanding of the agreement.
Have an Attorney Review Significant Contracts
Most entrepreneurs have little patience with or desire to read the fine print. In contracts, “the Devil is in the details”. So, get an attorney to review your contracts before you sign them, and you may save yourself a lot of problems – and potential litigation.
Run Credit Checks
In today’s climate, this is especially true. If you don’t check the credit worthiness of parties to whom you provide trade credit, you will lose control over the collectability of those accounts. And, that is a decision that can cost you dearly.
You can buy insurance against almost anything that can go wrong in business, including theft, fire, damage to expensive equipment, officer or director liability, product defects, errors and omissions, etc.
Get Required Licenses and Permits
State and local jurisdictions can have a variety of business licenses and permits that your business needs to have. Operating an unlicensed business can get you in trouble, and expose you to expensive fines.
Know Employment Law
Having employees put you at the greatest risk of litigation. You need to know what you can and can’t do, say, or ask when hiring, reviewing, disciplining or terminating employees. You need to know what kind of records you must keep, and how long you need to keep them. Among other things.
Hiring employees is a difficult and time-consuming task. Too often, entrepreneurs want to act too quickly when they find a warm body that fits the job requirements. But taking time to ask for and check references can save you from untold problems and headaches.
Plan for Emergencies
Develop a written disaster plan. What will you do if your company experiences a natural disaster, or loses key employees to sickness or accident? Think it through, plan it out, and it will be easier to deal with if it happens to you.
Don’t Over Promise
Customers love companies that over-deliver. Unfortunately, if you over promise, you put yourself and your company in a position that is not only difficult to defend. That is not the position you want to find yourself if the matter creates a dispute that lands you in court.
Take time regularly to check your assumptions. Are your policies and procedures being followed properly? Are your vendor payments going out on time? Is your payroll withholding being paid timely? Is your corporation in good standing? Checking on these things periodically can catch potential land mines.