Now is a good time to review your business structure, relationships, and agreements, to prepare and plan for success. Here is a short legal checklist for a strong start to 2017.
Evaluate your business structure
Even business owners who have already established a structure for their organization benefit from taking some time to reassess what best suits their goals. Between sole proprietorships, more formal corporations with shareholders, directors and officers, general and limited partnerships, and LLCs, there is a great deal of variety in business structures. As is true in many endeavors, with greater control tends to come greater liability. In an effort to strike balance, some business owners find that an LLC—a limited liability company—offers an ideal structure, blending flexibility and control while remaining true to its name and limiting the potential liability of its members. This option also allows for the business leader to elect the way in which he or she wants to be taxed. Via “pass-through” taxation, business income or loss can be included on members’ individual returns, and any tax can be paid at the individual level.
Evaluate your workforce relationships
The beginning of the year is a good time to review your policies and procedures governing workforce relations and to make sure that you have all necessary documentation for your employees in order. These include applications, job descriptions, and employee handbooks. If you have anyone working for you as an independent contractor, make sure that they truly fit that classification, bearing in mind that from a liability perspective it is the substance and not the form that matters. Finally, as a business owner or leader, make sure you protect the information you’ve worked hard to develop. Non-disclosure, non-solicitation, and non-compete agreements can be an important part of that protection.
Evaluate your third-party relationships
Clear arrangements with vendors, suppliers, distributors and other third parties on whom you rely are vital for the growth of your business, and the effective use of contracts is key to keeping the balance of these relationships in your favor. Carefully considered contracts can be just as essential in customer relationships and should be in place alongside well thought out policies that protect the business from liability for issues like discriminatory pricing. In terms of competitors, businesses should also be mindful of antitrust rules as well as the line between lawful competition and unlawful defamation or interference with a competitor’s own business relationships.
Know what to do when disputes arise
In the event of a dispute, planning ahead (and resisting panic) will significantly improve the outcome for your company. Remember that if there is a reasonable expectation of litigation it is your duty as a business owner or leader to preserve relevant documents. Furthermore, everything you put into writing may be used as evidence—for better or worse.
You should also be mindful of relevant statutes of limitation (often six years for contract disputes) and be sure to raise important issues before it is too late. Finally, keep in mind that arbitration may be a more attractive option than litigation, offering greater privacy and flexibility than you may see in court.
The start of a new year presents an opportunity for growth and development in your company. Taking time to make sure that the legal foundation for your business is strong will allow you to truly focus on what you do best: leading your organization to success.
David M. Burkoff is a partner in HunterMaclean’s Business Litigation group. He can be reached at firstname.lastname@example.org or 912-236-0261.