In this article, we look at how to mitigate some common legal risks in business.
The success and growth of your business depend on being on the right side of the law. If your business is not compliant with official regulations, it may face litigation.
Consequently, this could cause your organisation to spend a lot of time and money fighting legal battles and paying heavy fines. That is why as a business owner, it is vital to prioritise the implementation of an effective legal risk management system.
Business Legal Lifecycle educates business owners on their legal risks and makes legal advice accessible to all business owners. Take our legal risk assessments test to discover your legal risks.
Common Legal Risks for Businesses
Contract Risks
Errors in and misunderstandings of contracts are common areas in which businesses face legal risk, such as when an organisation breaches a contract it entered. Common contract risks are:
- Failure to review a contract, resulting in misinterpretations of its enforcement
- Agreeing to certain indemnities that might lead to unexpected liabilities
- Regulatory risks, where a contract is developed but doesn’t meet local legislation
- Failure to meet legal deadlines
- Inaccurate representation of products or services
A contract management system will help to ensure your contracts are managed effectively and that they are enforced in a way to minimise legal risk.
Infringement of Intellectual Property
An organisation could face a lawsuit for infringing on other businesses’ intellectual property. In most cases, this involves stealing or copying another company’s intangible assets, accidentally or otherwise. These intangible assets include trade secrets/copyright materials and trademarks.
Violation of Employment Laws
There are many employment laws, and they primarily serve the purpose of safeguarding the rights of employees. Specifically, they ensure that employees do not experience wrongful termination, harassment, or any form of discrimination in the workplace. As such, there could be an impending lawsuit if a business owner breaks or gives room for others to violate these employment laws. These cases can be lengthy and expensive, not to mention they will harm a company’s brand.
Product Liability
Product liability comes into play when a company’s product or service endangers or causes harm to customers – something we all want to avoid. However, it is important to note that federal and state laws are stringent against selling products or services capable of endangering customers.
Based on this, customers negatively affected by a product or service can file a lawsuit against the company. This can result in the company paying for damages if the affected customers can successfully convince the court.
Violation of Environmental laws
It is a legal duty for businesses to comply with environmental laws. These laws help prevent actions that threaten our ecosystem.
Some businesses that are more susceptible to changes and updates in environmental laws include oil refineries, chemical manufacturing companies, etc. Breaking an environmental statute can lead to heavy fines and loss of public support as the environment is a hot topic in today’s climate so be sure to do your research and talk to a specialist in this area.
Violation of Tax Laws
Tax law violation is one of the most common legal risks that businesses face. Tax law is incredibly complex, and as such, figuring out all the obligations your business is subject to can be overwhelming and easy to misinterpret.
Tax-related offences can attract severe penalties, which include heavy fines or even prison sentences, so be sure to do your research and talk to your accountant or a specialist tax lawyer.
6 ways to mitigate legal risks for your business
If you need help mitigating legal risk for your business, then take our legal risks assessment test today.
#1. Ensure you understand the contracts you sign
As a business owner, you must only agree to contracts you genuinely understand. This might require hiring a legal team to review the agreement for you.
There are various other steps that you can take to avoid any inadvertent contract breaches, such as:
- Automation of workflows
- Reminders for milestones and time-sensitive obligations
- Regulation of who has access to bolster security
- Encryption of data
- Keeping track of changes to documents
- Using secure e-signature systems
#2. Keeping On Top of New and Changing Regulations
Staying up to date with new or updated regulations and legislation can help avoid serious legal risks for you and your business.
#3. Ensuring Proper Business Conduct
Making your business’s codes of conduct and ethics known to your employees encourages proper business conduct. For example, you can achieve this by creating an employee handbook that explains your company’s rules and policies. Doing this should reduce discrimination, harassment, and other such issues to their bare minimum.
#4. Compliance with Environmental Laws
The best way to avoid environmental lawsuits is by implementing a detailed management plan that helps you abide by environmental laws.
#5. Be Sure to Abide by All Relevant Tax Laws
The best way to avoid committing tax-related offences is to track your business’s finances and accurately file your tax returns when due. Consequently, this may demand hiring a professional accountant.
#6. Hire a Legal Team
Hiring a legal team is one of the most effective means of mitigating legal risks. A legal team can help notify you of any threats before they occur and can help guarantee that your business meets all current legal requirements.
Does Your Business Need Help Minimising Legal Risk?
Having the proper knowledge of managing and mitigating legal risks is crucial to the success of your business. This is why it is essential to get the right advice.
Founded in 2016 by Jeremy Streten, Business Legal Lifecycle was initially developed out of Jeremy’s frustration with the law being reactive and costing business owners millions of dollars. This frustration led to the development of the Business Legal Lifecycle concept to allow business owners to be more proactive in their approach to legal risks.
Now expanded to the United States and United Kingdom, the Business Legal Lifecycle has the solutions to ensure that you know the legal risks in your business.
We help businesses reduce their legal risks in plain English so that it is easy to understand.
If you want to mitigate legal risk for your business, take our legal risks assessment test today.
