Raising capital, assembling a skilled workforce and outsmarting the competition are the most obvious challenges small businesses face on a daily basis. However, many of the key decision makers within these organizations tend to overlook the importance of the right way handle legal matters such as licensing, trademarks, fraud and tax compliance.
Unfortunately, the consequences of neglecting these responsibilities can cause significant financial and reputational damage that many small businesses would not be able to repair. In fact, a 2021 study by CB insights found that regulatory and legal issues are the fifth most common cause of startup failure, accounting for 18% of all business flops.
Lawyers understand that it is better to avoid legal problems than to overcome them. That’s why it’s critical that you take steps to help your small business customers mitigate risk in their operations. Not only will this reduce the likelihood of litigation and litigation from plaintiffs, but it will also help you provide greater value to clients and demonstrate the competence of your practice.
Use the right agreements when signing new service contracts
Keeping track of paperwork is of the utmost importance in business, regardless of industry or sector.
Always having documentation of significant events, such as financial transactions, disputes, complaints, new hires, etc., is vital (and often required by law) as it helps companies monitor and review their processes. Keeping a robust paper trail will also help when an auditor comes knocking, as it allows business owners to easily show an overview of their operations.
In addition, paper trails are especially important when it comes to sending estimates and onboarding new service customers. They are essential to keep customers happy as they remove ambiguity and provide certainty for both parties. As such, project estimates should include descriptions and explanations of things like billing and scope of work before they are signed off by both the business owners and new clients.
Fortunately, it’s easier than ever to sign estimates using electronic signatures, which are considered legally binding and valid in all states of the US. Using vcitaThe business management platform allows your small business customers to associate contracts with estimates and integrate opt-outs into their sales workflows so that they serve only new customers who have agreed to the terms of service, which are then automatically saved to the customer relationship portal.
This allows your business customers to protect themselves and their activities at all times, even when working remotely with you and their customers.
Conduct background checks on all new hires
Internal fraud is one of the most common legal risks small businesses face, and it’s also one of the most damaging. According to the Association of Certified Fraud Examinersa third of cases occur because companies do not have internal controls, which is often observed in small to medium-sized companies.
In addition, a typical case of fraud takes about 14 months to be discovered, with the average case costing $1.5 million. The best line of defense against this type of fraud is to ensure that your small business clients vet all new hires and conduct background checks to ensure the integrity of the workforce. Comprehensive checks should include elements such as:
- Verify credit history
- Confirm addresses
- Request and call references
- Submit an educational background check
- Providing Integrity Training/Testing Before Hiring
Many of these elements are covered by HR technology services such as Divisibleand you can create your own assessments using a survey platform such as type form. Of course, this doesn’t make any business infallible against internal fraud, but it will go a long way toward reducing the risk of it happening.
Set up systems to better protect intellectual property
When an organization fails to intellectual property rightsruns the risk of incurring intellectual property (IP) loss.
As it turns out, many small business owners are unclear about what IP encompasses and why it is critical to their long-term success. This is most likely due to its complicated and often abstract/subjective nature, making IP difficult to understand.
Nevertheless, IP is often one of the most valuable assets small businesses own, as they typically don’t have the same level of physical assets compared to their more established counterparts. In addition, suppose an emerging company has developed a disruptive technology solution or has never seen a feature/product before. In that case, they simply need to protect and enforce their IP rights if they intend to build and maintain a real competitive advantage in the market.
Therefore, lawyers should be ready to advise small business owners on how to protect their intellectual property through methods such as patents, trademarks, and copyrights.
Conversely, it is equally important to provide advice on how to avoid infringing someone else’s intellectual property rights, as the consequences can be serious.
Sensitive to legal risks
In most cases, a lack of insight is the main reason why small businesses are exposed to significant legal risk. You can also make an argument for not prioritizing correctly. For example, business owners may be more inclined to invest in marketing activities rather than pay for attorney fees simply because advertising is likely to provide a positive ROI right away, whereas hiring an attorney is typically a preventative measure.
However, there are many ways lawyers can help small businesses and increase the value they deliver to their clients. Aside from the three methods listed in this article, attorneys can protect against defamation, advise on collections and draft nondisclosure agreements to protect trade secrets, minimize exposure to legal risks, and create an environment in which small businesses can thrive without having to worry. about possible legal consequences.