As a small business owner, you're (hopefully) well aware of the typical liabilities that come with the territory (rent, employee salaries, taxes, and so on). However, a few lesser-known liabilities can catch you off guard if you're unprepared - potentially leading to financial loss or legal disputes. Check out these six lesser-known liabilities you should be aware of to ensure your business remains protected.
Cybersecurity Breaches: In today's digital world, cybersecurity breaches are becoming as common as - well, the common cold - and small businesses are not immune to them. Cyber attacks, such as ransomware, data breaches, or phishing attacks, can mean significant financial losses, damage to your reputation, and legal liabilities. Unfortunately, small businesses are often targeted because they are less likely to have robust cybersecurity measures in place. As a business owner, it's crucial to invest in cybersecurity measures such as firewalls, antivirus software, regular data backups, and employee training to prevent and mitigate the risks of cyber attacks.
Intellectual Property Infringement: Small business owners may unknowingly infringe on someone else's intellectual property, such as trademarks, copyrights, or patents. This can occur through the use of similar logos, brand names, or product designs. Intellectual property infringement - even if entirely unintentional - can result in legal battles, fines, and damages, costs that many small businesses can't readily afford. It's essential that you conduct thorough research and seek legal advice to ensure that your business's brand, products, and marketing materials do not infringe on anyone else's intellectual property rights.
Employee Misconduct: While employees are a vital asset to your business, they can also be a major liability. Employee misconduct (think harassment, discrimination, theft) can lead to legal disputes, damage to your reputation, and financial losses. It's crucial to have comprehensive policies and procedures in place, including clear codes of conduct, anti-harassment policies, and proper employee screening processes. You might also want to consider regular training and monitoring to help mitigate the risks of employee misconduct.
Contractual Obligations: Small businesses often enter into contracts with suppliers, vendors, clients, or partners - but they can become liabilities if not managed carefully. For example, let's say you sign a lease for a commercial space or commit to a long-term contract with a supplier. If you don't fully understand the terms and conditions, you could be setting yourself up for a world of hurt…and some unexpected financial burdens. Before you put pen to paper, carefully review and negotiate contracts and seek legal advice if needed.
Environmental Liabilities: You may face unexpected ecological liabilities depending on your business type and where you operate. For example, if your business uses hazardous materials or generates waste, you may be subject to environmental regulations and potential liabilities for contamination, spills, or other environmental damages. It's important to know and comply with relevant environmental laws and regulations, obtain necessary permits and insurance, and implement proper waste disposal and environmental management practices.
Product Liability: If you're in the business of manufacturing or selling products, you may face product liability risks. Product liability refers to a company's legal responsibility for injuries or damages caused by its products. This can arise from defects in a product's design, manufacturing, or labeling. These product liability claims can result in costly lawsuits, recalls, and damages, severely impacting your business's finances and reputation. Ensure you have proper quality control measures, conduct thorough product testing, and have adequate product liability insurance to protect your business.
As a small business owner, it's crucial to keep your head on a swivel; be aware of not only the apparent liabilities but also the unexpected or unconventional ones that can pose risks to your business.