A Few Tips to Help Protect Your Business from a Lawsuit

January 29, 2013

A few tips to help protect your business from a lawsuit

Business owners want to spend their time building their business, not defending themselves from lawsuits. While a business owner's time is often stretched thin, some legal preparation can go a long way to prevent a business from getting involved in legal quagmires further down the road. Many large businesses conduct annual legal audits to determine unknown legal issues and small businesses should spend some time doing the same.

Two of the most common areas of risk for small businesses are employment and intellectual property issues. When relationships between individuals and the company and creators of valuable information and the company are ill-defined, monetary issues often follow.

Some potential employment law issues

As a young company grows, the owner often needs to hire staff. But the relationship between the employer and the staff are often not clearly defined, because the owner is often more focused on making sure the new staff understand and complete their new duties rather than outlining the worker's legal relationship to the company. Often business owners create informal hiring arrangements where no written contract or policy is used. One of the immediate risks of a poorly defined worker-employer relationship is that the person may be more difficult to terminate legally. Also, businesses often run into tax issues if a worker is categorized as an independent contractor but the worker in reality is an employee. Even when a business has a standard employment contract, the business may apply the contract to employment situations without adjusting the contract. Blind use of an employment contract to different staffing situations is risky for a number of reasons but can be especially dangerous regarding the development and use of information crucial to the business.

Some potential intellectual property law issues

Frequently, businesses hire outside help, such as a freelancer or an outside contractor to help complete a project or develop a piece of the business. Too often businesses fail to outline in the agreement that the freelancer's or contractor's work will be owned by the business. If a business fails to identify the contractor's work as its own in the agreement, the work may not be an asset of the business on its completion, and the business may have to license the intellectual property developed for the business from the contractor. Also, business owners should have all employers and contractors sign non-disclosure agreements to protect proprietary business information from being used by an employee on his or her exit.

To prevent legal miscues like those discussed above and others, a business owner should conduct a legal audit of his or her business each year to learn what is not known in order to stave off future legal issues and to protect the assets of the business. The cost of a legal audit is more likely to be lower than the cost of losing crucial intellectual property or being involved in a lawsuit. To learn about the legal risks of your business, contact an experienced business attorney.

Article provided by The Law Offices of Anthony C. Duffy
Visit us at http://www.aduffylaw.com/