Proactive protection of your business is necessary, especially if you are running a small business. This protection includes intellectual property, accounting information, and customer-client information. A recent study shows that almost 60 percent of small businesses that have experienced legal issues in the past two years did not bother hiring a lawyer to help them.
Furthermore, according to Entrepreneur, more than 80 percent of small business owners rely solely on their personal insurance for business protection or do not have any business insurance at all. Several entrepreneurs do not give much thought to protecting their business interests.
No business is immune to problems. That is why business experts highly suggest that before launching your enterprise, you should set up measures to protect your interests. Here are some things to consider:
#1 Determine Your Business Structure
One of the most important decisions to make in leading your business to success is your business structure. This is for a number of reasons. For one, it will determine your tax obligations. Second, it influences your earning potential. Lastly, it determines your personal liabilities.
Furthermore, the business structure you select will influence the major decisions you will make concerning your business, including how you will borrow money and how you will raise investments.
A lot of seasoned entrepreneurs and financial advisors highly suggest setting up a separate legal entity for your business, such as a private limited company. This type of business structure shields your personal assets from obligations to your company, legal or otherwise.
#2 Keep Proper Records
Ensuring that your company’s documents are systematically kept in place is another way of protecting your business interest. Every business is required to create and maintain correct records and documents, including payroll and taxes, compliance with labor and wage requirements, and licenses and permits acquired.
The Internal Revenue Service also encourages businesses to keep records for the following reasons:
- Monitoring the progress of your business.
- Preparing business financial statements.
- Tracking deductible expenses.
- Supporting items reported on the tax returns of your company.
#3 Use Non-disclosure Agreements
As your small business grows, you will partner with individuals, contractors, and other companies. This cannot be avoided. And when you are exploring the possibility of working with these other entities, having a detailed non-disclosure agreement is essential.
A non-disclosure agreement (NDA) refers to a contract between parties that plan to share information about their companies. Essentially, this agreement prohibits both parties from disclosing any confidential information.
With an NDA, you protect your company from the possibility of losing trade secrets or valuable work to a competitor, which can risk the success of your business.
#4 Implement Data Security
You might have heard about plenty of high-profile data security breaches, hitting big names like Yahoo, LinkedIn, and eBay. Although these major corporations are data theft targets, it does not mean small and medium-sized businesses are safe from these threats. Most business owners have a false sense of security when it comes to data.
However, as technology has become more complex, criminals are becoming more crafty as well in their methods of stealing. One simple solution to deter this breach in data security is to invest in cybersecurity services. No matter the size of an organization, intellectual property, customer data, and banking credentials are deemed valuable to thieves.
Educating your employees about the importance of safeguarding passwords, strong wireless encryption settings, and proper disposal of data is a must. With these steps, you help protect the interests of your business.
#5 Have Written Contracts in Place
When running a small business, most business owners are alright with closing deals orally. After all, entrepreneurs give more importance to speed over accuracy when closing deals with partners and even when hiring employees. But we all know that verbal agreements are difficult, if not impossible, to enforce.
Putting agreements into writing helps clarify each party’s obligations. It prevents any misunderstanding that could lead to rifts, severing your good relationship with the other party. A written contract also helps explain how any potential issue can be resolved.
Although a problem might initially be small, try to look at it from a wider perspective and check if it can impact your business in the future. Whether your business is still young or you have been in the industry for quite some time, take time to consider these things.