There’s a certain degree of risk that comes naturally with owning and operating a small business. The risk of failure is commonly considered and often prevents many from even getting started. That’s not the only risk to be aware of though. Owning a business means you’re at risk for getting involved in legal trouble, so it’s important to take steps to protect both you and your business.
Liability Insurance
Liability insurance is one of a business’s first lines of defense against lawsuits. There are different types of liability insurance, and they all work to help small businesses survive the financial fallout that tends to accompany being sued. Even if a lawsuit isn’t pending, different forms of liability insurance are still useful. Businesses are often considered responsible for the safety of individuals on their premises. If someone gets injured on their property, liability insurance can help them have the resources necessary to pay restitution and make things right.
Tax Preparation Services
Businesses are liable for collecting and paying taxes. If you have employees, you’ll be expected to collect taxes from their paychecks and pay those in addition to the employer’s half of payroll taxes. Your business is expected to pay taxes on profits made as well. Failing to pay taxes can result in the IRS targeting your business. They can seize your business’s assets and you could potentially end up in jail as a result of not paying. Paying your taxes correctly and on time is essential, but often difficult to do. Tax preparation services can make that problem irrelevant. It’s their business to know the ins and outs of business tax laws and to levy them for the benefit of their customers. They may offer a package that includes their future assistance in the event that errors or audits are made on your taxes.
Retaining an Attorney
Despite your best efforts, you may end up involved in a lawsuit. Retaining an attorney can make the difference in how heavily your business is impacted in the aftermath. Attorneys aren’t just useful when you’re being sued though. There are a lot of laws and regulations businesses need to follow, and an attorney may be able to help you navigate them and stay in compliance. They can also help you understand your responsibilities as a business owner to your employees and those who interact with your business. Of course, attorneys don’t typically work for free, so you’ll need to include the cost of different legal fees and costs in your budget. It’s important to understand the difference between legal fees and costs when it comes to paying for an attorney’s services. While they may sound synonymous, they aren’t the same thing.
Your Business Structure
Business structures are generally the legal entity you choose to use as a business for legal and tax purposes. There are different structures you can choose from. Unless you opt to operate as a sole proprietorship, your structure likely comes with a degree of liability protection built into it. This separates your personal assets from your business assets. In the event of legal action being taken against your business, choosing such a structure protects your personal assets.
Software Security
If your business collects and stores customer information, you probably have some sensitive data on your hands. That data falling into the wrong hands can be the instigating factor in class action lawsuits, especially if you’re found to have been negligent in protecting that information.
Your business needs to have adequate software security to protect sensitive data. You need good antivirus software at a minimum. It’s also a good idea to back up your files periodically so you have copies in the event that the ones on your computers become compromised somehow.
Legal risks are an inherent part of a business, but there are things you can and should do to mitigate them. Purchasing insurance and making use of professionals like tax preparers and attorneys can help you reduce your liability as a business. It’s a good idea to carefully select your business structure and software security as well. When all these aspects are functioning correctly, your risk of getting involved in legal trouble lowers.
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