New York business owners are no strangers to risk, as a recession, supply chain issues and worker shortages have shown over the past two years. But no matter what the market holds, liability and risk are always part of doing business. An important part of protecting business interests lies in knowing where to avoid unnecessary entanglements.
From the choice of entity formation to access to a legal perspective on contracts, corporate policies and local, state and federal laws, business owners in Williamsville and surrounding areas will want to know how to avoid unnecessary legal complications in many areas of finance, commercial transactions and business relationships.
Where there is greatest liability for a company
Business owners face a gamut of risk not only within the organization with employee relations and the practices of shareholders, business partners and executives, but also outside the company in customer relations and between other business partners. Some of the chief areas of risk are:
- Employee relations, especially where there are claims of discrimination, unlawful discharge, or workplace safety violations.
- Fickle market conditions, which may make relations with investors uncomfortable if poor market performance prevents them from receiving a return on their investment.
- Ethics issues and regulatory compliance risks, especially where executives and leaders are accountable.
- Disputes between partners, shareholders, or with other companies over the terms or performance of agreements, which can lead to breach of contract claims.
- Tax liability, especially if there have been employee misclassification, payroll or tax code violations.
Steps to minimizing liability
The choice of business structure has an impact on liability. For example, sole proprietorships and general partnerships have the greatest liability and potential tax exposure, whereas corporations and LLC’s, which have far less personal liability and more tax advantages.
Purchasing insurance for the company is an important step toward protecting it from lawsuits, as well as taking inventory of potential issues such as local ordinances or state laws, industrywide safety protocols, or ethics standards and the current market climate.
Finally, having well-crafted contracts to solidify relationships is essential for any business, as is reviewing them regularly to ensure that they are relevant to the concerns of the company. Other areas of risk management surround employee relations, so it is important to have clearly written company policies and practices in employee handbooks to minimize misinterpretation.