Running a business is no less than a challenge. There are various things that business owners need to look after. From serving the customers, managing cash flow, to keeping up with the marketing and branding tactics and more, it’s certainly an uphill slog.
It is the due responsibility of the owners to do everything within their limits to minimize the risks and keep the business operations running smoothly. One major issue most businesses face is the late payment issue. Over 70 percent of UK SMEs tend to go through late payments from their clients, slowing down their further operations and eventually resulting in the failure of the company.
To overcome the late payment issues, what small businesses and start-ups can do is opt for invoice financing – A legitimate way to borrow money against the amounts due from your customers.
Another potential risk that businesses need to secure themselves from is the lawsuit. Although, not every other company gets sued, it is always best to be prepared for it than being sorry.
In this article, we have come up with three ways a company can protect itself from getting sued.
1: Watch What You Say & Do
When it comes to your brand image, company owners and employees should anyhow avoid making any public announcements or conducting any business operations that are questionable. In other terms, this not only means that people working for the company should avoid things like slanderous comments but should not do business with corrupt individuals.
Although you may think that working for such group of individuals won’t cause problems, but if they take a hit, in no time your company’s name will be linked in the fallout.
Another thing included in the point is limiting or rather avoiding any possible conflicts of interests. Business owner and the employees should strongly avoid getting into situations where a conflict of interest may arise. These situations are bound to damage your company’s integrity and could potentially land you in legal waters.
2: Hire a Competent Attorney
It is advisable for small business owners to have an attorney they trust. You may need their help and advice before you make any big financial decisions or in extreme situations like in case of being sued.
Hence, look for an attorney who is not only smart in finances but is also familiar with local laws and customs (especially the area your company operates). On the other hand, also make sure that you retain such an attorney who has expert knowledge in fields critical to your business.
There are various ways a company can find an attorney suitable for them. Some of these include:
- Cold calling and interviewing from a phone book
- Seeking references from your business partners
- Professional organizations that solely handles legal matters for companies
3: Separate Yourself from Your Business
There are many successful entrepreneurs that operate their businesses as a sole proprietorship. However, the only problem they may encounter is that during an event if the company issued, the owner’s personal assets (such as the cars or homes) are easy to be attached in a court of law.
A way you avoid or at least limit the possibility of the owner’s personal assets being targeted is to have a trust own the businesses. In most cases, a trust is a legal entity which files its tax returns regularly and can own properties, businesses, cash, securities and many other assets as such.
So, if your business is owned by a renowned trust and if at all it is sued (your business), the only assets that are then targeted in a court of law are the ones that are in the trust itself.
Thus, this separates your company’s finances from your personal finances. Making your house and personal wealth secure from attacks even if in the event you lose your company in a judgement. This is known as incorporating. The disadvantage of incorporating is that it requires you to understand and keep up with all the additional rules, reports and taxes that the government will need for a company.
The Bottom Line
Every business owner is responsible to secure their businesses and personal assets in the event of a lawsuit. By implementing the three actions mentioned above, rest assure your business is on its way to a legal and hassle-free future.