A large injury claim or business loss can bring down an unprepared business. Insurance is one key area that should be used. This includes workers comp insurance, general liability, fleet auto, business interruption.
Are you implementing appropriate safety measures? Injury claims can involve workers compensation or third party liability. This should be addressed.
Business claims can involve breach of contract, fraud, unfair competition, theft of trade secrets, and many other issues. They are extensive and complex. Large business decisions should be carefully analyzed with your business advisers (accountants, attorneys, insurance brokers). For example, are you hiring a new sales manager who has a non-competition agreement with his/her former employer? Make sure they disclose this and you deal with this complex legal issue up front before you make the hire. This goes for any business deal.
Business Structure and Corporate Maintenance
Are you a sole proprietor? If not, consider a corporation, limited liability company, partnership or other entity. There are many advantages that should be explored. There are liability issues, tax issues and other areas that have great benefit.
If you are an entity, are you maintaining the entity by prompt filings? You need to maintain the organization. Especially, if you want to avoid personal liability for business losses.
Contracts and Contract Administration
List and keep track of all important contracts like leases, supply agreements, joint ventures, profit sharing agreements. Summarize each one and note or calendar trigger dates. A good example is calendaring the negotiation of your lease well in advance of expiration so you have time to negotiate. Are you responsible to indemnify another entity in case of loss? Keep track of such obligations so you are aware and can deal with it.
Obtain all information necessary to comply with state and federal employment laws. They are complex and extensive. A professional is very helpful here. A particular area where businesses sustain losses are "independent contractor" agreements and "wage and hour" law violations. Insurance is another component of employment issues that needs to be monitored.
Succession and Estate Planning
Succession planning is the transfer of business interests upon retirement, death or sale. All businesses need to ensure that business interests are transferred effectively, with minimal taxation. There are many tools available such as buy-sell agreements, trusts, family limited partnerships, life insurance or other insurance products to fund a business upon sale or transfer. Failure to plan for orderly business succession can result in monetary loss or worse, loss of the business due to taxes.
Conclusion and Action Plan
All business has risk. Understanding the extent of risk, planning around it and minimizing it will ensure a smooth running business and avoid catastrophic losses.
A. Review and update corporate and business records.
B. Review and comply with all employment law issues.
C. Have an annual review of all business insurance with your broker.
D. Keep a list of all key contracts and have someone responsible to administer them.
E. If you have a succession plan, review it periodically with your attorney.
F. Keep a comprehensive "Risk Management" binder or digital file to track it all.