If you own a business, or you play a pivotal role in your company’s success, you need to consider risk: Exposure to lawsuits. Claims of intellectual property theft. Shrinkage. Employees who move to a competitor business and take confidential company information with them.

You can be responsible and pro-active, but still be at risk. Here are some steps you can take to lessen the risk all businesses inevitably face.

Create a business entity. Form a corporation, a limited liability company (LLC) or other business entity.1 Separate the personal and business “you”, especially when it comes to personal bank accounts and company accounts. Talk to a business specialist at your business bank. This is a critical decision that can have legal and tax consequences.

The business entity can protect your personal assets in cases of litigation2so be sure to separate your personal assets from company assets and keep the two at arm’s length.

Create a co-founder agreement. Draw up an agreement with all owner-partners before you open the doors for business. No one anticipates having problems with business partners. However, just as marriages can end in divorce, business relationships can also develop insurmountable problems. How will the business relationship be defined under adversarial conditions?

What if one founder wants out? What will happen to the business in case one founder dies or becomes disabled? All contingencies should be addressed in advance.

Get legal help to create a non-disclosure agreement with teeth, and make sure all relevant parties sign it to reduce the chances that sensitive company information will go public.

Learn your company’s rights and obligations in protecting   intellectual property.3 Crowd-funding may sound like a good idea until you see your idea on the store shelves earning revenue for the competition. You can’t copyright an idea, but you can copyright or trademark everything from a search engine algorithm to the company logo.

Forecast realistic earnings to be better prepared. Often, the launch of small businesses and start-ups is based on unrealistic earnings projections. Instead of following the best-case scenario, try simulating the worst case: a flood, a disgruntled employee who sabotages your computer system, a new competitor who can undercut your prices. Would you still have the funds to keep your doors open under near-disaster conditions?

Keep records of everything. Tax authorities will expect you to be able to prove any claims of business expenses. Buy a printer for the office? Pay for it with a company check or charge it to your business card. If it’s a legitimate business expense, you need records to back it up. This can also be important for insurance claims or warranties, so develop and maintain a well-organized filing system for all records.

Use free resources. Instead of hiring expensive consultants, keep operating expenses as low as possible by taking advantage of free sources of information. You can contact a regional branch of the Small Business Administration  for good advice. Your business bank can also provide the kind of information small business owners need, while designing tools that enable you to conduct business and grow to profitability faster.

  1. Click here for a free on-demand webinar on forming a business entity in Nevada
  2. For more information on how to reduce the risk of litigation, click here for a free on-demand webinar featuring attorneys from the Las Vegas law firm of Snell & Wilmer.
  3. Click here for a free on-demand webinar about the key elements of intellectual property.

 


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.