Legal Risks That Businesses Face

business-risksAll business face legal risks.  Consult with your friendly business lawyer and avoid pulling your hair out..  If you ignore the potential legal risks, it could cost you BIG time.  Some of the more frequent risks faced by businesses are listed below.

Legal Risks to Watch Out For



Many small to medium size businesses form their legal entity without consulting an attorney.  They use online companies, figuring they will save mucho dollars.  First of all, the problem is that every business is different.  The decision you make about what legal structure you will operate under will have very different consequences.  The legal structure affects limiting your personal liability.  In addition. the entity you chose will affect how much documentation will be required to be produced.  Furthermore, the tax effects of the legal entity chosen should be considered.   The legal structure chosen also affects how the business is managed and how decisions are made.

Depending upon the legal entity that is used, there may be extensive record keeping requirements to protect you from being personally liable for the debts, obligations and liabilities of the business.  You do NOT want that to happen.  Therefore. understanding the pros and cons of each potential business legal structure is extremely important to know.  If you are not sure, please consult with a business attorney to ensure you make the right choice.




Many of the lawsuits faced by businesses are a result of claims that the business violated some type of business law.  Discrimination claims and wrongful termination are common.  There is also much debate over the new overtime law which revised certain provisions in the Fair Labor Standards Act (“FLSA”).  The intent and effect of such changes are to increase the salary amount which would put employees into the non-exempt category. Such employees would be entitled to overtime pay as a result.

The changes to the FLSA were supposed to take effect on December 1, 2016.  However, a Texas federal court issued a nationwide preliminary injunction blocking the changes from taking effect on December 1, 2016.  This leaves businesses with a considerable amount of uncertainty.  Many businesses have already put the revisions to the FSLA into effect.  It would be a very wise decision to consult with a friendly employment attorney with respect to this issue.




Your business may raise capital in exchange for the investors getting some type of ownership interest in the business.  This will subject  the business to the securities laws of the state and federal government agencies.  Failure to follow the correct procedure when issuing “securities” can result in hefty fines or even jail time.




It is imperative that the agreements that a business has be in writing and be very clear.  Retaining a business attorney to assist with your contracts can save you money down the road.  This can avoid poorly drafted contracts.  It is also important that all parties to the contract understand what it means.  Save yourself the cost of a lawsuit (and a migraine) and have a business attorney be involved in the contract process.




In the event of death or disability, a business should have a succession plan in place.  Therefore, if there is a death or disability with a business owner, the other business owners(s) have the right to purchase the interests of such owner.  This is accomplished through a buy-sell agreement.  It is a good idea to have spouses sign the buy-sell agreement.  In addition, it is also well worth the expense to make sure you have insurance in place so that the buying owner(s) have the funds to purchase the ownership interests of the deceased or disabled owner.


There are other legal risks that business owners face, but the legal risks listed above should be addressed, hopefully with a professional that can provide the business owner with sound advice.

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