Legal Risk Check-Up
Written by: Brett Callahan
Legal Risk Check-Up
It is almost the end of the calendar year! It is also a busy time for many businesses as they try to wrap up any deals, close their books for end-of-the-year accounting, recognize their employees, and celebrate their past year’s accomplishments. And let’s face it, making it through 2021 with a healthy business is quite an accomplishment. However, you may want to add something new to that end-of-the-year to-do list: schedule a time in January to sit down and take a serious look at how your business has grown or changed over the past year or several years, and what that might mean for your legal risks. After all the new year is a time for new beginnings and what better fresh start could your company have than identifying and fixing threats before they snowball into a major problem?
The most cost-effective approach to business legal disputes is usually to avoid them altogether, but that isn’t always possible. Businesses have limited resources and can’t focus on everything at once. So, if you have to prioritize, what are the most common types of legal issues businesses face that either create legal troubles or make them more complicated and expensive than they need to be?
- Using inappropriate, outdated, or unfavorable contracts. Contracts are supposed to protect against legal risk. Odds are good if your business has been “using that contract forever” or no one remembers exactly where the contract came from, that the contract isn’t providing much protection. Remember when considering your potential exposure, even if each individual transaction under a regularly used contract may seem small, when you add them together you can get a big problem.
- Not paying attention to the rules of a licensed or regulated industry. You study, take tests, and pay fees to get your real estate or contractor license. But how frequently do you check to make sure all of your practices and contracts are following the rules, including any new rules, of whatever board or agency issued that license? If your business going to take a serious hit if you (or an employee) lose their license, it isn’t enough just to pay your renewal fees. You need to make sure you are taking basic steps to actively protect that license.
- Not performing other business maintenance on a regular basis. When was the last time someone looked at the corporate by-laws or company operating agreement? Are you paying attention to what new labor laws apply as your business grows and adds employees? Your practices and policies need to be in alignment with any governing laws or any controlling documents for the business. Businesses change, sometimes slowly, sometimes quickly. Any major change, such as a large expansion, should prompt an immediate review of what new laws your business might now have to follow. But even if it seems like not much has changed in a while, if you review your legal framework, you might be surprised at what you find.
Risk management requires you actively manage those risks and not ignore them until it is too late. If you have any questions on where to start or need help ensuring you are using favorable contracts and complying with any applicable laws, regulations, or governing documents one of our business attorneys may be able to help.
This blog post is not intended to provide legal advice or substitute for the advice of legal counsel with respect to specific facts and situations. See disclaimer