Minimizing Legal Risk in Your Growing Business

Sep 13, 2024 | Listen

Michelle Bomberger and Kathy Svetina discuss how small businesses can protect themselves legally as they grow in the Help, My Business is Growing podcast.

As your business starts to grow, the excitement of expansion often brings new challenges—especially when it comes to legal matters. The risks that once seemed straightforward now seem more complex. Employment laws, tax codes, and even seemingly straightforward contracts might unexpectedly lead to costly disputes. 

So how do you protect your company and minimize legal risks? Do you need to hire a full-time lawyer or will a legal consultant do to make sure that your business stays compliant and protected? Or are there more cost-effective ways to achieve the same level of security?

In this episode, Michelle Bomberger and I discuss the essential steps you can take to protect your business from legal risks as it grows. Michelle offers practical strategies for small business owners to safeguard their operations, focusing on key areas like contracts and risk assessment.



Timestamps for this week’s episode

02:17 How business owners can minimize legal risk 

06:36  What is indemnification and why it matters

08:36 Must-have items in customer contracts 

13:14 Essential components in employee contracts

36:44 Actionable step to get better legal insight and minimize risk in your business


Your risk profile depends not only on your industry and the regulations that govern it but also on your personal and leadership team’s tolerance for risk. It’s easy to sign a deal and move forward, but understanding what you’re signing is key to protecting your business. So to minimize legal risks: 

Know What You’re Signing

Contracts often come with compliance requirements, like data security, confidentiality, and intellectual property clauses. Even if you’re set to sign the contract regardless, take the time to understand the terms. This will help you prepare and put systems in place, so the risk of breaching the agreement is minimized.

Think Ahead

In every business relationship, think of what could go wrong and what steps you can take to prevent them from happening. This proactive approach helps you stay compliant and avoid costly legal issues down the line.

I think it's important for business owners to understand that that risk is prevalent everywhere - not only in your business but also what kind of industry you are in and what kind of regulations can support it.

What is indemnification and why it matters

Indemnification is a key concept in contracts where one party will take responsibility for certain risks or damages that might occur. For example, if you work with an IT provider and their actions cause a data breach, an indemnification clause could require them to cover the costs and manage any legal consequences.

Each indemnification clause is unique, and depending on how it’s written, provides different levels of protection. What’s important is that these clauses should be carefully tailored to your specific business needs. Instead of generic wording or phrases in your contract, make sure that the indemnification terms address the specific risks your business might face. This way, you can be confident that you’re protected in case something goes wrong.

“Take every single relationship, customers and vendors, employees, landlord, and business partners that you have in the business and think about that particular risk profile of each party and what could go wrong.” – Michelle Bomberger

Must-have items in customer contracts

Here’s what to include in your customer contracts:

  • Ownership 

If you’re providing a service or product, be clear about who owns the final product. Do you retain ownership, or does the customer? Is it a shared ownership? Being very clear about ownership will help avoid confusion and potential disputes later on.

  • Ongoing relationships or partners

If you are in a long-term or ongoing business relationship with a customer make sure that your contract reflects that. You can set up automatic renewals or scheduled updates and reminders about the contract – that maybe it’s time to renew them or renegotiate terms.  This way, you can prepare for and adapt to changes in liability, new regulations, or pricing adjustments.

  • Aim for clarity 

Your goal is to remove as much ambiguity as possible. Clearly define roles, responsibilities, and expectations in the contract. The fewer questions left unanswered or open to interpretation, the smoother your relationships will be.

The most important thing is to remove as much ambiguity (in contracts) as you can, and that's something that lawyers focus on - how do we make this as clear as possible.

Essential components in employee contracts

Here’s what to include in your employee contracts:

  • Offer Letters 

The offer letter should clearly state the job title, who your employee will report to, salary/compensation, and benefits. 

  • Restrictive Covenants Agreements 

These agreements cover things like confidentiality, intellectual property, and non-solicitation (e.g., not taking your customers or employees if they leave).  

  • Employee Handbooks and Policies

Your handbook should lay out your company’s policies. Remember, employment laws differ by state, so make sure your policies fit the specific regulations where your employees work, especially if they’re remote.

“The big challenge with legal and risk management is you don’t know what you don’t know, and you need legal to help you with that.” – Michelle Bomberger

The next actionable step to gain better legal insight and minimize risk in your business is to complete a Business Health Assessment from Equinox Law Group. This complimentary, no-obligation report offers a thorough evaluation of your business’s health, identifying areas that need attention and helping you move forward confidently. In just 5 to 8 minutes, you’ll receive a detailed 30-page document that covers critical factors such as vendor relationships, employee matters, and intellectual property.

You can also build a strong relationship with a trusted legal advisor to help guide you along the way. With a legal advisor in place, you’ll have the support needed to address risks proactively, preventing small issues from escalating. They can also help you build a solid legal foundation for your growing business. 

Summary

  • Understand contracts and anticipate potential issues to minimize legal risks.

  • Customize indemnification clauses to match your business’s specific needs for better protection.

  • Clearly define ownership and terms in customer contracts to prevent future disputes.

  • Ensure offer letters, restrictive covenants, and employee handbooks are detailed and compliant.

  • The next actionable step to take it to use Equinox Law Group’s Business Health Assessment to evaluate your legal standing and establish a relationship with a legal advisor for ongoing support.

Transcript

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About guest – Michelle Bomberger

Strategic Legal Counsel, Founder and CEO

Equinox Law Group

Michelle Bomberger, CEO and Managing Attorney at Equinox Business Law Group. Michelle believes that every business deserves to have the same strategic law advantages as mega-corporations. 

Her experience as a business owner and entrepreneur gives Michelle unique insights into the emotional and practical aspects of owning a business and how important legal infrastructure is to growth and success. 

Website: https://equinoxbusinesslaw.com/

LinkedIn: https://www.linkedin.com/in/michellebomberger/

Facebook:  https://www.facebook.com/Equinoxbusinesslaw

Twitter: https://twitter.com/equinoxlaw

Youtube: https://www.youtube.com/@EquinoxBellevue


About host – Kathy Svetina

Kathy Svetina is a Fractional CFO for growing small businesses with $10M+ in annual revenue.

Clients hire her when they’re unsure about what’s going on in their finances, are stressed out by making financial decisions, or need to structure their finances to keep up with their growth.

She solves their nagging money mysteries and builds a financial structure with a tailored financial strategy. That way they can grow in a financially healthy and sustainable way.

Kathy is based in Chicago, IL and works with clients all over the US.

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