You have worked hard to start your own business, but have you taken steps to protect it? Litigation can destroy your business if you don't have the proper protections in place. Not only can litigation be a huge headache, but it can also be a PR disaster for your business. Implementing a few proactive measures will go a long way to protect your business, and will place you in a stronger position in the event that your business is sued. Below, we'll address six steps you need to follow if you want to keep your business out of litigation.

Document, document, document!

If you wait to start protecting your business until you're sued, it's too late! Start off by putting business practices and processes in writing, including contracts with employees. Business often have employees of several different rights, such as freelancers and W2 employees. Correctly defining the scope and nature of employees' duties in a written contract will help everyone involved with the company.

Additionally, employees need to sign non-compete, non-disclosure, and confidentiality agreements. Contracts will prevent employees from taking information about the company and selling it to your competitors, using the company secrets to get a new job, or setting up a competing business. Contracts help to protect the valuable information that makes your business successful.

It's similarly important to ask that your business vendors and service providers do the same. Contracts should include information about intellectual property rights, pricing information, delivery terms, confidentiality issues, and any other critical information pertaining to your relationship. Payment terms are one of the biggest areas to focus on, as it will help to prevent serious financial loss if you run into a vendor payment issue. Additionally, correct definition of the delivery and payment terms will help to reduce the risk of being sued by vendors and service providers.

Finally, consider implementing customer contracts, which are set up to avoid problems with guarantees. Have you ever needed to recall a faulty product, or been injured as a result of a faulty product? Who is responsible for the financial damages because of the product? Contracts with customers that clearly spell out the risks and assign legal responsibility for problems that may arise. This helps to prevent issues with liability later on down the road. If you have a third-party vendor handling products, it is important to write a waiver of liability to ensure your company is protected in case of a product recall.

Don't fall victim to a simple "handshake" contract. Rather, take the time to formally document business protocols to ensure your company will be protected. Not every situation will merit a formal agreement, but you need to track your handshake with a paper trail. Keeping the right information together puts your business ahead if you do end up dealing with litigation.

Hire an Attorney to Review Your Documents

If you have not drafted the documents through an attorney, you may not have identified all of the issues that could arise with a deal, which could cause problems if litigation occurs. An attorney needs to review all written agreements to make sure you're protected from every angle.

When working with an attorney, be sure to understand the documents you sign on behalf of your business. Sometimes an agreement might look straightforward, but the fine print can leave your business exposed to risk. An experienced attorney knows common risks that businesses face, as well as how to mitigate those risks.

Set Up Correct HR Measures

When you hire new employees, they ideally sign an employee agreement and then are sent to complete onboarding training. However, many businesses - especially new businesses - do not make this a priority. There are specific human resource measures that need to be established to ensure employees have all necessary information and that they know what is expected of them.

 Drafting an employee handbook is a highly proactive risk-avoiding measure, as it establishes employee expectations, appropriate behavior, and company policies. Firing an employee without having a handbook in place can expose you to the risk of being sued for wrongful termination. Writing a proper employee handbook is the ideal way to protect your company and prevent major lawsuits. Similarly, conducting and documenting annual employee trainings can be helpful in reinforcing the policies in your handbook.

Know Your Business Partners

Do you know who you are going into business with? While your best friend or sister may be a blast on the weekends, starting a business together is not always a wise decision. A business partnership is not unlike a marriage, as you need to completely trust in this other person and know that they will pull their own weight. For example, if they exceed your business' budget, you could become burdened with debt if the business fails. Don't partner with someone because you feel obligated to do so. Rather, make sure you share core values with your partner, and that you both are aligned on business objectives and processes.

Be Proactive About Protecting Your Intellectual Property

It's crucial to be proactive when it comes to your intellectual property by registering copyrights, trademarks, and patents. Failing to protect your intellectual property early on can lead you into needing to protect yourself in court. In some cases, you may lose your rights entirely if protective measures are not in place.

Not protecting your intellectual property can also make it easier for your competitors to steal your ideas and profit off of them. No one should be using your protected intellectual property unless they have signed a license agreement. License agreements are another crucial component of business growth and avoiding litigation.

Maintain Correct Insurance

Business insurance generally protects you from being sued personally, keeping your personal assets out of the reach of judgment creditors. However, if you do not obtain adequate insurance, someone may be able to come after your personal belongings in a lawsuit. Even if this is not a realistic possibility, you do not want litigation to interfere with your dream. Failure to have adequate insurance in place can drive you into bankruptcy when a major lawsuit arises.

Call your insurance provider to explore options to best protect your business. If a person does have a legitimate claim against your business, insurance will compensate them, protecting you from losing everything.

Likely, you put your heart and soul into your business. Take the additional measures needed to protect it! Contact Catalyst Legal today for a free consultation as to how we can help protect every aspect of your company.

The world of online marketing brings constant changes and, as a business owner, it may be difficult to stay on top of it all. Marketing online is crucial to others knowing about your business, but in doing so, you must adhere to online marketing rules and regulations. Selling products on your website may not seem like a big deal, but there are several documents that you need to create, sign, and submit to actually do so. Below, we'll outline some of the pitfalls we most commonly see with businesses engaging in online marketing, as well as how to avoid them.

Protection

Consider everything that you've invested in your business - you've probably spent a great deal of time and money creating an excellent product or service and building a client base. Now, consider what measures you've taken to protect that investment. Have you obtained the proper trademarks and copyrights to prevent others from stealing your hard work?

You should never spend thousands of dollars in marketing without first investing in trademark and copyright registration. In fact, the registration process is relatively simple and can be done more quickly that you would expect. Having copyright and trademark information on your website is the best way to let others know that you're the creator and owner of the product you worked so hard to create.

Essentially, anything created to be used in online marketing for your business should be protected. This includes your logo, trademark, and slogan. Registering each aspect that you will use for marketing will guarantee the ability to keep all of the money that your business makes.

One final consideration regarding trademarks is to similarly ensure that your business is not infringing on another company's or individual's trademark. Be careful of the way in which you use copyrights and trademarks, especially when it concerns competitors or other businesses. Learn more about fair use and how it applies to your business, understanding that fair use does not always apply in commercial situations.

Privacy and Data Collection

You've probably already experienced issues with privacy and data collection as a consumer - perhaps you sign up for one email newsletter from a business you trust, then end up receiving twenty emails from businesses you've never heard of.

It's critical to notify your audience that you are going to collect their personal data, such as email addresses and phone numbers, then inform them what the data will be used for. If you do not use the information in the right way, your business can be sued. Either inform your clients that your business intends to sell their contact information, or send out marketing materials after they sign up.

When it comes to privacy and data collection, be sure to establish a privacy policy and have it reviewed by an attorney before publishing it online. Never post customer images if you have not received proper written permission.

False Advertising

One common legal matter that we handle often involves advertising. To avoid legal issues, advertisements cannot be unfair, deceptive, or misleading. Create ads that are relevant to the company and to the product. By using misleading advertising, your customers may end up purchasing something they did not actually want. Not only is this bad business, but you can additionally be sued for false advertising.

When it comes to advertising, the best practice is to always be upfront and honest with your customers. Honest advertising and excellent service and product offerings not only help build you a loyal client base, but protect your company from potential lawsuits. Similarly, be wary of comparative advertising, such as telling your clientele that your product is far superior to your competitor's product. This can also expose you to potential liability.

Final Reminders

Online marketing can be intimidating, as it exposes your business to potential legal risks if proper protocol is not precisely followed. To keep your business safe, utilize our legal team to review your marketing and advertising efforts. Our expert team will review all of your business' online marketing with a critical eye to ensure compliance and mitigate legal risks to your business. Fill out the form below to receive a free consultation!

We once had a client who came in for a consultation with a story we've seen many times before - he and a close friend had started a business together. Initially, things were going really well: they had a great business model, were opening up an underserved market in Salt Lake City, and had excellent profit margins. After a year, profits began to decline. When our client took a closer look at his books, he realized that his friend was spending significant amounts of money on expensive lunches, golf outings, and even personal expenditures.

When our client broached the subject at their next partnership meeting, his partner brushed it off as simply the cost of doing business. He refused to stop using the corporate account as his own personal piggy bank. This caused a rift in their relationship, and brought their once-successful business to a grinding halt. Eventually, the business was forced to close, leaving both partners out of quite a bit of money.

Though the lesson was learned the hard way, the client regretted never drafting a partnership agreement with his friend. Many partnerships choose to forego the agreement for a myriad of reasons: to save on expense, to avoid negotiating with a close friend or family member, or because they simply don't understand the value of putting the agreement on paper. At the time, our client didn't realize that having a partnership agreement could have limited the amount of money each partner could spend without the other's approval. This would have prevented one partner unilaterally taking on debt in the name of the company.

What is a Partnership Agreement?

A partnership agreement is the governing document for a company. It explains how the company will be run, outlines how profits and liabilities will be distributed, and places limits on what partners can do. In an LLC, a partnership agreement is commonly referred to as an operating agreement. In a corporation, the governing document is the bylaws.

A good partnership agreement will outline who is permitted to open bank and credit accounts, take on debt, and purchase real estate. It will also define the rights of individual owners, create mechanisms for resolving disputes, and provide a way out in the event of gridlock.

Ideally, business owners should create a partnership agreement that is tailored to their specific business rather than using a boilerplate document that can be found online. Online templates can provide a starting point, but oftentimes have hidden language that can be devastating for business owners. For example, one former client used a partnership agreement found online that had language stating that the partners would share profits through a sixty-forty split instead of fifty-fifty. Luckily, partnership agreements are flexible and can be easily changed under the right circumstances. However, it is always better to get it right the first time, because you never know when a dispute will arise. Changes to partnership agreements are much more difficult when the owners are not talking to one another.

Regardless of the type of entity business owners may consider, having a clear partnership agreement is a preventative measure that can save business owners a lot of headaches. In some cases, the agreement may even prevent the business from folding altogether. Cost is often the reason many business owners choose not to have a partnership agreement drafted. However, in most circumstances, the cost is no more than $1,000.00 and can be bundled with setting up the company. Whether you are partnering with a total stranger, a close friend, or family member, having a partnership agreement in place is critical. It will bring peace of mind, can save you thousands of dollars in litigation fees, and could even save your business from having to close because of a dispute.