5 Common Business Risks and How to Avoid Them

Building a business involves taking risks. 

But risk management tactics can help, and having the right team of business attorneys and legal experts can help reduce your likelihood for problems. 

Decreasing your risk means knowing what to look out for. At Generations Law Group, we work with all our clients to minimize risks. That’s why we’ve outlined the five most common business risks and how to avoid them.

Contracts help set forth the terms and agreements between multiple entities. When a contract is vague or fails to set forth expectations of both parties, it can leave room for problems. 

Instead, you want to be sure your contracts are clear and detailed.

This includes employment contracts, even if you operate in an employment-at-will state. Don’t forget to outline your relationship with contractors, as well, because these relationships are important to document.

Consider the vendors you work with regularly and how you can clarify those relationships with a contract or added details in an existing contract. It’s never too late to go back and renegotiate or review an existing contract.  

If you’re unsure whether or not your contracts include the details necessary, you should discuss the matter with a business attorney.

Business structure matters and can have a serious bearing on your organization’s risk factors. If your business is not structured correctly or as a legal entity, you could be opening yourself up to additional issues. 

Many businesses start as a sole proprietorship. But as the needs of the business change and adapt, that business owner might need to refile as a different business entity. Failing to do so could mean your operations are not in compliance with the law.  

Additionally, failing to outline ownership and management within your business formation documentation can also leave you open to serious risks. As part of this, you should outline how ownership is transferred and how liability applies to the business owners.

Operating a business has inherent day-to-day risks as part of the ongoing management of the business. 

But the longer your organization fails to look after its business operations requirements, the more your risk can compound. And going back later and solving such operational issues can be expensive and result in tons of lost productivity. 

Failing to protect intellectual property is another way that you could face problems for your organization. The best way to avoid issues down the road, however, is to discuss your organization’s ongoing intellectual property and operation risks with a business attorney.

Minimizing compliance and regulatory risk is crucial to your success. Make sure you know Idaho laws concerning operating a business within your specific industry. Each business type will have different requirements, so don’t believe what other business owners tell you if they’re in different industries.

For example, you need to comply with the regulations from the Internal Revenue Service. These regulations might outline when you have to collect payroll tax, unless you want to pay that money out of pocket. Failing to meet these requirements could mean paying large fines, back taxes, and personal liability.

Litigation risks can come from just about anywhere– from your employees making claims that they were mistreated or discriminated against to your customers claiming you didn’t provide the product or service you promised.

Engaging in litigation can be time-consuming and expensive. In some cases, this leads businesses to settle, which still carries a large financial impact on your business. 

The best option when facing litigation is to engage a good business attorney so that you know the best way to protect your organization’s financials.

Litigation risks can come from just about anywhere– from your employees making claims that they were mistreated or discriminated against to your customers claiming you didn’t provide the product or service you promised.

Engaging in litigation can be time-consuming and expensive. In some cases, this leads businesses to settle, which still carries a large financial impact on your business. 

The best option when facing litigation is to engage a good business attorney so that you know the best way to protect your organization’s financials.