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How to Protect a Small Business Against Legal Issues

— May 27, 2020

Starting a business is no easy task, but by staying ahead of common pitfalls, you have a chance at seeing your enterprise thrive.

As a small business, you are facing an uphill battle. You may have a great product and the right people in your organization, but you need to be firing on all cylinders to stay afloat. Because of the trial and error required to start a company, 50% of small businesses fail in the first five years. 

There are many possible reasons why small businesses struggle, including employee productivity, or starting with insufficient cash flow. But, there are also many legal issues that can derail a small company, including forgetting important tax requirements and providing an unsafe work environment, among others. Stay ahead of these common vulnerabilities, and your business has a better opportunity for success.

Taxes, Regulations, and Benefits

One requirement shared by every business big and small is the need to pay taxes, and the failure to take tax law seriously could cripple your business almost immediately. Taxes need to have a part in every corporate budget. Businesses with employees are required to withhold federal income tax, Medicare, and social security funds from the pay of every worker. Failure to withhold the proper amount could get you in hot water with Uncle Sam, so consult a tax attorney to be sure you are in compliance.

In addition to taxes, there are many other government regulations that your business may have to follow. Most companies, outside of those with independent contractors, must pay minimum wage and extra pay for overtime. If your company is new to advertising, make sure that you are following guidelines for which groups you can target with your advertisements and which disclaimers may be required. Some states require that you have a business license for your particular industry. Do your homework as you start your business to ensure that you don’t forget about any of these necessities.

If you value your employees, then you want to keep them happy and healthy. That is why you need to look at offering health insurance plans. Not only does it show compassion for your workforce, but according to the Affordable Care Act, health insurance is a requirement if you employ more than 50 employees, and proof of this insurance must be reported to the IRS.

Providing a Safe Workplace

Every day, your employees go to work assuming that they will return home at the end of the day in one piece, and as a business, you owe it to them to deliver on that promise. Not only is caring for your workforce the right thing to do, but failing to keep your employees safe could result in costly lawsuits that could ruin your company. The Occupational Safety and Health Act of 1970 gives employees the right to safe employment, so verify that all of your offices follow the required OSHA guidelines.

Construction workers working on a buliding; image by Josue Isai Ramos Figueroa, via
Construction workers working on a buliding; image by Josue Isai Ramos Figueroa, via

Companies with warehouses and construction crews need to be extra careful of the dangers that surround them. Regular audits should be performed by management to ensure that all safety measures are being met by the employees and that all equipment is properly maintained. All chemicals and spills should be labeled, tools should be used appropriately, and hard hats, gloves, and earplugs should be worn when necessary.

Even if your workplace is mostly office-based, you still need to ensure the safety of your employees. Sitting down all day can pose its own set of dangers. It’s said that sitting is the new smoking when it comes to negative side effects, including harmful stress on the back and neck. To prevent unneeded strain, provide ergonomic chairs, and ensure that all employees take their required breaks and lunches. Doing so will avoid that back pain and prevent eye strain from looking at their computer monitors for too long.

Avoiding Cyber Crime

As technology continues to evolve, as do the cyber threats that can bring down a small business. One cyber-attack could cost a big business over a million dollars, so just imagine the damage your small business could sustain in the same situation. As far as legal issues are concerned, if a hacker breaks into your system and steals the information of your customers or your employees, your company could get sued for not doing enough to prevent the data theft.

The best thing you can do as a small business owner is to create a culture of online security at your workplace. Have weekly meetings where you provide updates on common threats and new dangers. One of the most used scams is the phishing email, which is a communication that is intended to create a sense of urgency by appearing to be from a figure of authority like the bank or the IRS. Train your folks on the signs of phishing emails, which include many misspelled words or an email that appears to be from a real company or agency, but is sent from a common platform like Gmail or Yahoo.

If you cannot hire on a full IT team, then be sure to bring on at least one security expert or promote someone from within to the position. It will be their job to ensure that all backup servers are maintained, that antivirus software is installed, and that employees update passwords on a regular basis. If a hack does occur, let your customers know right away and provide solutions. The last thing you want to do is try to hide a data breach and increase the risk of a lawsuit.

Starting a business is no easy task, but by staying ahead of common pitfalls, you have a chance at seeing your enterprise thrive. 

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