Top tips to avoid legal headaches in your business

Legal fees can be expensive, so many businesses tend to avoid them, only employing the services of a lawyer in extreme circumstances. The result? Businesses can be exposed to unnecessary legal risks that could otherwise be avoided. Set out below are a few tips to help avoid some of the common elephant traps.

  1. Document important transactions properly

This is the biggie. In my experience too many businesses rely upon personal relations, goodwill and the word of their contractual partners. This is fine when the relationship is functioning, but comes at a high cost if anything goes sour.

In short, make sure you have a proper contract for every important transaction or agreement. This includes having your own terms and conditions, which reflect your business and adequately protect you. If it is not written down, it’s much harder to argue what was agreed.  

Try to avoid concluding contracts by email, as again it may be difficult to pin down exactly what was agreed.  Also, limit who in your business has the authority to make contracts, this will avoid the risk of unwanted legal commitments being made without being accurately assessed.  

  1. Understand the risks in your business, and make sure they are allocated correctly.

If you can identify the risks, you can then ascertain who should take responsibility for them.  For example, if a third party manufactures goods for you, they should be responsible for supplying a correctly functioning product that corresponds with the description and samples.  If you subcontract delivery to another party, they’ll be responsible for making sure nothing is damaged in transit.

If risks fall to you, make sure you manage and mitigate them properly.  This could be as simple as taking out appropriate insurance, training staff, or putting in safety procedures in place.  

  1. Oversee cash inflows and outflows

You should be able to explain and justify all business income and expenses.  If you have external shareholders, they’ll expect that you have internal disciplines and controls on spending, who can spend money, and on what.  Linking in with Tip 1, avoid cash transactions in your business as they can generate suspicion and doubt.

  1. Ensure you own your Intellectual Property

Whether your business depends on intellectual property, or if it’s solely brand related (logo, slogan, company name), make sure you own your IP and it’s protected. If you’ve used agencies for artwork, designs, or code, confirm the contract states clearly that you own it.  If employees or subcontractors may create valuable IP in the course of their work, their contracts should include a safeguarding clause requiring them to pass all rights to you.

  1. Get the appropriate licences, registrations and consents you need for your business, and comply

Most businesses require some form of registration or licence, even if it is simply a registration with the Information Commissioner’s Office for GDPR purposes, or buying licences for software used in your business. It’s important to ensure that you always comply with the licences and regulations. More and more regulators are encouraging employees to become whistle-blowers, all it takes is a disgruntled former employee to put pressure on you – it is much cheaper in the long run to comply.  

Photo by Tim Gouw, published on Unsplash

Eddie Lawson


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