6 Ways of Protecting Your Small Business

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As a small business owner, you have the unique challenge of doing more with less. You might wear multiple hats because you’re performing multiple roles that are essential to the success and growth of your company. Protecting your small business is as important and should always be taken seriously. From cyber security measures to insurance policies, there are ways in which you can ensure your business remains secure while continuing to grow. This article will explore effective methods for protecting your small business from potential threats or bad scenarios that could derail any progress made over time.

Make Sure to Choose the Right Legal Entity

Your choice of business structure affects taxes and liability.

Common Business Structures

Sole Proprietorship

The business is owned and operated by one individual. It is the simplest and most common form of business ownership. The owner is personally liable for business debts and obligations.

Partnership

A partnership involves two or more individuals or entities sharing ownership and responsibility for the business. It can be general partnerships or limited partnerships, with varying levels of liability for each partner.

Limited Liability Company (LLC)

An LLC combines aspects of partnerships and corporations. It offers limited liability to its owners (members) while allowing for flexible management and taxation. LLC suits small businesses for its flexibility in management and taxes with similar liability protection as corporations. However, different states might have separate regulations about LLCs, and it’s paramount for one to grasp such laws.

Corporation

A corporation is a separate legal entity from its owners (shareholders). It provides limited liability to shareholders and has a more complex management structure. Corporations can be C corporations or S corporations, with different tax treatment.

S Corporation

An S corporation is a tax election made by an eligible corporation to avoid double taxation. It allows the business’s income and losses to flow through to the shareholder’s individual tax returns.

Nonprofit Organization

Nonprofits are structured to achieve specific charitable, educational, or social goals. They can be organized as corporations or other nonprofit forms and are typically tax-exempt.

Factors to Consider When Choosing a Business Structure

Selecting the right business structure involves evaluating various factors, including:

  • Liability:  Consider how much personal liability you will take as a business owner. Different structures offer varying levels of protection against personal liability for business debts and obligations. Sole proprietors and partners have more direct control, while corporations and LLCs may have more complex management structures.
  • Taxation: The way your business is taxed can significantly impact your financials. Consider how each structure affects your personal and business tax liabilities.
  • Regulatory Requirements: The legal and administrative obligations associated with each structure. Corporations, for example, have more compliance requirements than sole proprietorships.
  • Exit Strategy: Your long-term plans for the business. If you anticipate selling or taking your company public, a corporate structure may be more suitable.
  • Continuity and Succession: Consider how you want the business to continue in the event of your retirement, disability, or death. Some structures make it easier to transfer ownership.
  • Industry and Location: The nature of your business and where it operates can influence the best structure. For instance, some professions may have restrictions on the type of structure they can choose.

Secure Intellectual Property

Protecting your company’s unique creations, discoveries, and inventions is necessary against theft or misrepresentation by others. Trademarks, copyrights, and patents protect you when people exploit your work without consent. Here are ways businesses can secure intellectual property:

Trademark Protection

An important part of intellectual property security because it prevents others from using your company’s or product’s name, logo, or other identifying features without your permission.

Copyrights

This covers all your original content, including writing, music, and painting. You can control people’s ability to reproduce, distribute, and publicly perform your work as per your preferences without worrying about someone violating your copyright. You have the right to take legal action, whether through takedown notices or lawsuits if a violation has caused significant damages. 

These measures assure you that only your patented idea as a process is yours, and no one should copy it. 

Patents

This grants exclusive rights to inventors for their novel and non-obvious inventions. Businesses can secure patents for products, processes, and even software. To obtain a patent, you must apply through the appropriate government agency and meet specific criteria.

Secure Your Business with Insurance

Securing your business with insurance is essential to protect it from various risks and unexpected events. Here are several ways to do so effectively:

  • Identify Your Insurance Needs: Determine the specific risks your business faces, such as property damage, liability claims, employee injuries, or cybersecurity threats. Tailor your insurance coverage to address these needs. Common types of business insurance include:
  • uncheckedGeneral liability
  • uncheckedProperty
  • uncheckedWorkers’ compensation
  • uncheckedProfessional liability
  • uncheckedCyber liability insurance
  • Work With an Experienced Insurance Agent: Consult a knowledgeable insurance agent or broker who can help you assess your needs, recommend appropriate coverage, and find the best insurance providers.
  • Review and Update Your Policies Regularly: Business needs change over time. It is important to review your insurance policies regularly to ensure that they still provide adequate coverage for your risks. Make adjustments as needed.
  • Maintain Adequate Coverage Limits: Ensure that your coverage limits cover potential losses. Being underinsured can leave your business vulnerable.
  • Consider Business Interruption Insurance: This type of insurance can help your business recover from unexpected disruptions, such as natural disasters, by providing coverage for lost income and extra expenses.
  • Evaluate Bundling Options: Some insurance providers offer discounts when you bundle multiple policies. Consider bundling to save on premiums while still getting comprehensive coverage.
  • Budget for Insurance Costs: Incorporate insurance premiums into your business budget to ensure you can afford coverage without straining your finances.
  • Seek Legal and Professional Advice: For complex insurance needs or industries with specific regulatory requirements, consult legal and industry experts to ensure you have the right coverage.

Know the Common Injuries and How to Prevent Them

There are several types of personal injury claims that businesses can face. As an owner, understanding personal injury claims, you are faced with is crucial because it will determine the legal approach you should take. The most common ones include:

  • Slip and fall accidents
  • Work-related injuries
  • Product liability
  • Accidents caused by defective equipment
  • Assault or battery
  • Traffic accidents

The best way to protect your business from personal injury claims is to take a proactive approach to safety:

  • Risk Assessment: Identify potential hazards and risks within your business operations and premises. Conduct regular risk assessments to pinpoint areas where accidents or injuries could occur.
  • Safety Training: Ensure that all employees receive proper safety training and know safety procedures and guidelines. Regularly update and reinforce safety training to stay compliant with industry standards.
  • Maintain a Safe Environment: Keep your workplace clean, well-maintained, and free from hazards. Regularly inspect your premises for potential dangers.
  • Equipment Maintenance: Regularly inspect and maintain equipment and machinery to ensure they are in good working condition. Address any malfunctions or defects promptly to prevent accidents.
  • Record Keeping: Maintain thorough records of safety training, incident reports, and corrective actions taken. Good record-keeping can be valuable in the event of a personal injury claim.
  • Employee Involvement: Encourage employees to participate in safety programs actively, report potential hazards, and suggest safety improvements. Create a culture of safety awareness among your workforce.
  • Customer and Visitor Safety: Extend your safety measures to protect customers, clients, and visitors who enter your premises. Mark potential hazards and maintain a safe environment for all.
  • Emergency Response Plan: Develop and regularly practice an emergency response plan for various scenarios, including fires, medical emergencies, and natural disasters.
  • Continuous Improvement: Seek opportunities to enhance safety measures based on feedback, incident analysis, and industry best practices.

Implement Strong Cybersecurity Measures

Small businesses today are especially vulnerable to cyberattacks because of the pervasive nature of the internet. Data breaches, monetary losses, and tarnished brand reputation are all possible outcomes of such attacks. Keeping your company safe from hackers requires constant vigilance:

  • Cybersecurity threats frequently target flaws in out-of-date software, making it all the more important to maintain a regular schedule of software updates and patches. To mitigate these dangers, always use the most recent versions of your operating system, applications, and antivirus software.
  • Effective passwords should be complex and different for each account, and staff members should be encouraged to do the same. If you want to beef up security, multi-factor authentication (MFA) is the way. 
  • Both firewalls and intrusion detection systems work to keep malicious actors out of your network and to notify you of any intrusion attempts. 
  • Educate your workers on how to spot phishing emails and other common cyber risks so that they can respond appropriately. It is common knowledge that the best defense against cyber threats is a well-informed workforce. 
  • Always have a plan to deal with a data breach, and back up your files regularly. The effects of a cyberattack can be mitigated with the help of a well-planned reaction. 
  • Work with your IT provider to develop a comprehensive plan for protecting your company’s data. You may greatly lessen the likelihood of cyber mishaps by maintaining a state of constant vigilance and proactivity.

Work with an Experienced Business Attorney

While insurance coverage can provide financial protection, having a knowledgeable legal advisor on your side can help prevent and mitigate legal disputes. Here are some reasons why you should consider hiring a business attorney for your company:

  • Legal Compliance: Business laws and regulations are constantly changing, making it difficult for business owners to stay updated and compliant.
  • Contract Drafting and Review: Contracts are essential for conducting business, but they can also be a major source of disputes if not drafted properly. A lawyer will review contracts before you sign them to protect your rights and interests.
  • Intellectual Property Protection: Your business’s brand, products, and services may be valuable assets that require protection from infringement or misuse. An experienced business attorney can help with trademark registration, copyright protection, and drafting confidentiality agreements to safeguard your intellectual property.
  • Employment Law: As an employer, you are responsible for complying with various employment laws and regulations. You will need help creating employee handbooks, drafting employment contracts, and handling any legal disputes that may arise with employees.

When choosing a business attorney, consider the following factors:

  • Experience: Look for an attorney with experience in working with small businesses in your industry.
  • Communication and Availability: It is important to have open communication with your business attorney, so choose someone responsive and accessible when you need their guidance or support.
  • Reputation: Research and read reviews to ensure the attorney has a good reputation and track record in handling similar cases or legal issues.
  • Cost: Consider the costs of hiring a business attorney, including their hourly rates, retainer fees, and any additional charges for specific services. Be sure to discuss fees upfront so that there are no surprises later on.

Conclusion

Safeguarding a small business is a multifaceted undertaking that demands a proactive and strategic approach. Choosing the right legal entity, securing intellectual property, obtaining the appropriate insurance, preventing personal injury claims, implementing robust cybersecurity measures, and consulting with a seasoned business attorney are critical components that fortify the foundation of a small business. These protective strategies not only prevent potentially crippling financial and legal setbacks but also contribute to a safe and trustworthy environment for employees, customers, and partners alike. 

With these measures in place, business owners can focus on growth and innovation, confident that their enterprise is well-shielded against the array of risks in today’s dynamic business landscape. Therefore, it is imperative for small business owners to regularly evaluate and reinforce their protection strategies, ensuring they remain effective in a constantly evolving world of new challenges and emerging threats.

I'm Allison Dunn,

Your Business Executive Coach

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