Being in the driver’s seat in a growing business is not easy, as many challenges must be handled daily. Apart from operations and finance, there is another aspect that needs to be taken care of. As businesses expand, they encounter various legal issues that can restrict operations and threaten their long-term growth.
Legal hurdles can come unannounced when the company is entering new markets or developing new products, for instance. In fact, any major decision or change can have legal ramifications.
Understanding these challenges can help shield a company from potential pitfalls. We look into some common legal hurdles and offer practical strategies to manage these risks effectively.
Employment Law: Navigating Workforce Expansion
As companies add employees, compliance with labor regulations becomes necessary. This is one of the first legal challenges that businesses face.
Expanding the workforce demands adherence to federal and state wage regulations. As you hire more employees, ensure that they are compensated fairly and according to the state wage laws. Federal minimum wage regulations also apply. Ensure there is overtime pay and rest breaks.
Companies are legally required to provide a workspace that is free from any sort of discrimination or harassment. There is regular training that the staff, including the HR, has to go through in order to reduce potential lawsuits.
Personal Injury and Liability Risks
When the company is scaling, it becomes more complex to maintain a safe work environment, and any occupational hazard can be a massive issue.
Businesses with physical locations, like factories and warehouses, or those with worker-operated vehicles are at risk of human injury. It can be workers who are operating the machine or customers/clients who are at the premises. It is essential to have adequate liability insurance coverage.
Premises liability coverage can cover these risks, but it is important to maintain the safety standards on-premises in order to prevent any injury and accidents. Any client or worker can hire a personal injury attorney to file a lawsuit against your business. Taking adequate precautions and safety measures can help minimize this.
Product liability works along the same lines, as consumers can take legal action against a defective product that has caused injury to them or their loved ones.
Securing Your Business Intellectual Property Assets
Intellectual Property (IP) is an extremely valuable asset for growing companies and it is especially vulnerable to infringement due to its non-material nature. In the U.S., the value of importing charges on IP was $5.2 billion, according to Statista.
For example, it is crucial to get your company’s trademarks and copyrights registered. You also need to secure patents to prevent any other company, usually a competitor, from copying them.
There have been several patent infringement cases in the US. The process of patenting can be long, and it is advisable to start it as soon as possible.
Contractual Disputes
If contracts are poorly drafted, disputes can arise between companies and vendors or suppliers. These are usually about delivery timelines and payment schedules, along with quality expectations. In case there is a dispute, the contract should offer a clear path to resolve the issue.
The same applies to employment contracts, which need to be carefully drafted to ensure everything is covered: The terms of employment, job responsibilities and exit procedures.
Customer agreements need to have the terms of service and the refund policies clearly mentioned.
Regulatory Compliance: Obeying The Laws
Industry regulations are varied and complex, often an area of concern for growing businesses. There are federal, state, and local laws to comply with and as the company expands to new markets, the laws change.
If your business is into manufacturing or any other industrial activity, there are a lot of environmental regulations related to emissions, wastage, and water disposal.
Legal Disputes
The sky can fall anytime for growing businesses, with litigation lawsuits coming from employees, competitors, or even the state itself.
It is a good idea to structure your business as a limited liability company (LLC) as it protects your personal assets from legal claims.
Also, clear dispute resolution policies, like mandatory clauses, should be implemented to help resolve any unforeseen conflicts. As TorHoerman Law suggests, businesses need to review their compliance practices in order to proactively address a potential lawsuit from any third party.
Conduct regular employee training, where they are educated about legal requirements. Hire attorneys who specialize in business law, helping you navigate the potential challenges. Also, do not forget to get proper insurance coverage, just as a safety net.
These are some of the proactive steps you can take to address potential issues and focus on growing your business. It is important that every growing business is prepared for such challenges from the start so that you can navigate the challenges effectively.
