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How much risk is an unnecessary business outcome?

On Behalf of | Mar 4, 2022 | Business Law And Litigation |

California business owners know all about risk. In the turbulent economy of the past two years that brought on a recession, worker shortages and supply chain issues, entrepreneurs, employers and proprietors have had to always be two steps ahead of the game so that they can land on top.

But part of remaining competitive includes protecting business interests so as to avoid unnecessary entanglements. Whether it comes down to the choice of entity formation or the legal implications behind written contracts, company policies and compliance issues, business owners in Long Beach and surrounding areas can benefit from legal tips that will help them to avoid unnecessary risk in their financial, commercial and business relationships.

What are the areas of greatest liability?

Business owners face risk both from within and without the business. The network of relationships within the organization include:

  • Partners
  • Shareholders
  • Executives
  • Employees

Outside the enterprise, there are customer relations and intricate supply chain interconnections to suppliers, manufacturers, distributers, or transport operators.

Some of the main areas of potential legal risk in these connections are:

  • Issues of protection and privacy, misinformation, or personal injury in customer relations.
  • Disagreements between partners or shareholders, or with other companies that could lead to breach of contract claims.
  • Accountability of business leaders over regulatory compliance or ethics issues.
  • Collective bargaining disputes or discrimination, wrongful termination, worker safety violations, or worker misclassification claims in employee relations.
  • Fulfillment of promises made to investors when variable market conditions may lead to underperformance.

What measure will lower the company’s risk?

The type of corporate structure can have a tremendous impact on how much personal or tax liability is present. Sole proprietorships and general partnerships hold the greatest personal liability and tax exposure, but LLC’s provide protection to members and corporations can offer some tax advantages.

It is wise to purchase insurance for the business as protection against lawsuits. Having corporate counsel to advise on intricate federal and state laws or local ordinances, as well as industrywide safety and ethics standards, will identify areas of potential legal risk.

It is vitally important for the long-term viability of the business to have well-written contracts that clarify the relationships between all entities, as well as their periodic review to ensure relevance. And reviewing and updating company policies and practices, as well as employee handbooks, will ensure that ethical standards and obligations remain crystal clear.


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