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5 Legal Threats to Your Small Business

By: SmallBizClub



A small business owner faces plenty of challenges each day, and some of those challenges could land the owner in a court of law. When you can identify the most significant legal threats that face your small business, then you can take the necessary steps to protect yourself, your assets, and your livelihood.

Liability Issues

One of the most common types of lawsuits in the business world are lawsuits dealing with slip and fall accidents. Whether it is ice on the sidewalk outside your front door or a slick spot on your already slick sales floor, your company faces considerable problems with property issues.

Even if you prevail in such litigation, you may still be on the hook for legal fees, and the legal mess becomes a distraction from daily operations. If the plaintiff wins the suit, you will be compelled to pay expensive damages. In order to win a suit, the plaintiff must prove that you were negligent regarding your duty to maintain a safe property.

The best approach to avoiding these issues is to make it a policy to take care of icy sidewalks and spills on slick floors immediately. You should put up gates to limit access to parts of your property that customers should not be, and be sure to post signs that warn people to watch their step. Additionally, liability insurance is frequently available to protect your assets. If your personal assets are substantial, it may be time to consider incorporating your business to raise the corporate veil.

Discrimination Lawsuits

If an employee or client feels that they have been discriminated against, they may turn to the legal system for assistance. Discrimination could mean that your company avoids hiring people of a certain age, race or religion, or have created a hostile work environment. Not only can they bring expensive claims against you, but the potential damage to your reputation may cost you your best customers for years afterwards.

The best way to protect yourself from discrimination lawsuits is to hire a diverse staff, and make sure everyone (especially management) receives appropriate cultural sensitivity training. Not only will a diverse staff prevent employees from feeling like they are being discriminated against, but it will also benefit your business by offering a variety of perspectives to your team, enhancing problem-solving and synergy.

Trademark Or Copyright Issues

Many small businesses do not bother to do the necessary trademark searches before they utilize marketing images or catch phrases. Sometimes entire business models have been patented and are unavailable for your use. If you wind up using a logo that looks like the logo of another company, then you could be facing a serious and significant lawsuit.

The last decade has seen an unprecedented rise in instances of patent trolling. This is a slimy business model wherein individuals set up a holding company whose only purpose is to own patents, and scour the marketplace looking for potential violators and suing them for all they’re worth. If you haven’t seen it yet, take a look at Drew Curtis’s TED Talk on “How I Beat a Patent Troll.”

Before you put together a marketing plan or debut your logo, it is important to get a trademark lawyer to make sure that logo or catch phrase is not already being used. The small amount you pay a lawyer to make sure you are good to use your logo will save you the potential devastation of a large-scale lawsuit.

Contractor Disputes

Many small businesses outsource to contractors to get important tasks such as payroll and computer support taken care of. At some point, the relationship could go sour and either the small business or the contractor will be forced to sue to recover lost income.

When you look for a contractor to handle some of your business processes, be sure you do a thorough check on every candidate. A little upfront research can help you find a quality contractor and avoid potential lawsuits. Always remember that a contract will not magically make a dishonest person honest, nor will it magically fulfill orders a contractor cannot afford. Do use contracts to clearly communicate the terms of the agreement, but try not to think of a contract as an enforcement mechanism, because it only serves that purpose if you are willing to fight it out in arbitration or in court.

Data Privacy

If you collect information from customers and that information is hacked by criminals, then your company could be found negligent. Data breaches by outside hackers is a huge problem for small businesses, and the solutions are getting expensive.

When your small business connects its network to the Internet, you are exposing yourself to risks. You need to hire an expert to help you reduce those risks and do everything you can to protect your customers’ data. Many services offer SSL certificates which will help encrypt data and protect connections to prevent data breaches and cover your legal behind.

Click here to learn more about inexpensive SSL certificates

A small business is just as exposed to potential lawsuits as a large business. A small business owner must be proactive in addressing potential issues if they want to avoid future legal problems.

Author: Rachael Murphey is an entrepreneur and blogger on topics of business, finance, and personal growth. She has written for Idea Café, biggerpockets.com, Los Angeles Slip and Fall Lawyers, and the Host Review.

Published: December 2, 2016

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SmallBizClub.com is dedicated to providing small businesses and entrepreneurs the information and resources they need to start, run, and grow their businesses. The publication was founded by successful entrepreneur and NFL Hall of Fame QB Fran Tarkenton. We bring you the most insightful thinking from industry leaders, veteran business owners, and fellow entrepreneurs. Follow us on Facebook, Twitter, and LinkedIn.

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