When you own a small business, your mind is preoccupied with making sales, paying employees, scaling, and myriad other concerns. The last thing you want to deal with is legal action being taken against your business. Unfortunately, injury lawsuits, tax issues, and disgruntled customers are a part of the game, and if you get caught unprepared, your business and personal life could end up in shambles. Take the following precautions now, and save yourself some major headaches down the road.
Avoiding Injury Lawsuits At Your Business
People hurt themselves, and there’s nothing you can do about it. You can protect your business’s assets with insurance though, and you can take precautions that minimize the risk of you being found at fault if someone is injured and decides to sue.
Renew Your Liability Insurance Each Year
If, against all odds, your business loses a lawsuit against someone who seriously hurt themselves tripping in your store, you could be on the hook for hundreds of thousands of dollars. That’s why liability insurance is so important.
It only costs around $500 per year to have a standard liability policy, and those payments are made monthly. It won’t have much impact on your cash flow, and a lawsuit won’t send your business into the red.
Maintain Your Store Or Property
It may seem annoying, but keep your business immaculate. When there’s a chance of snow, salt and shovel your sidewalk and steps. If someone slips and falls on your steps, you could be sued!
If you run a grocery store chain, make sure the items don’t block the aisles or fall off shelves. Walmart, for instance, gets sued thousands of times each year by people who were injured in stores. In short, if you see something that could possibly be hazardous on your property, rope it off or fix the problem.
Tax and Financial Considerations
Focus on growing your income by scaling your business, not by evading taxes Thanks to more funding for the IRS in 2020 and 2021, your chances of getting audited will only rise.
If you participate in aggressive tax evasion measures at your small business, you could very well end up being charged with a crime in addition to penalties and back taxes.
“Calls regarding white collar crime have increased for us in the past year,” said Jonathan Pruitt, a marketing associate at The Law Offices Of Lloyd Long. “Business owners who are evading taxes on significant amounts of profit or income have a decent chance of going to prison without the right representation.”
Keep Careful Records
Keep your receipts, advertising expenses, employee payroll, and financial records on file for several years – even reputable businesses that have done nothing wrong can get audited, and you’ll need to have all of those statements on hand in that case.
General Legal Tips For Small Businesses
Separate Your Personal Assets
If at all possible, set your small business up as limited liability company (llc), S Corporation, or something similar. Sole Proprietors may have fewer taxes, but their personal assets can be on the line if their business is sued.
Treat Customers and Employees With Kindness
You don’t always have to overthink things – if you treat others with dignity and kindness at all turns, the chances of your business getting sued decrease dramatically. Set your store or service business up in a way that is easy for customers to access and use (including a handicap accessible entrance). Write transparent and honest employment contracts for your employees, and don’t play games to avoid paying them overtime if they’ve earned it.
Your time is better spent on your business than on the taxes, so bite the bullet and hire a talented small business CPA. It will help you make more money in the long term. Also, run your contracts past an employment or business attorney when you are just starting out – then, you can use those templates in the future.