Small businesses face many challenges, from limited funds to legal issues. Any entrepreneur or small business owner will tell you legal issues in business can be harrowing. From costly legal services to breach of trial disputes, no business wishes to see damage to their reputation or profits. Lawsuits against companies may be avoided by educating yourself on small businesses' most common legal issues. Safeguarding your business and future with the correct coverage can help you prevent legal problems and save you time, money, and stress.
Small business tax law
Understanding small business taxation is an integral part of running a successful company. It is not uncommon for small businesses who forgo learning about tax law to run into legal issues or face steep fines. Most small businesses will be required to file several different tax forms which can include but are not limited to:
- Federal income tax
- Self-employment tax
- Employment tax
- State and local taxes
- Sales tax
Misrepresentation
Material misrepresentation (or MMR) in business typically refers to an omission or false statement made on a contract, business negotiation, or legal form. This misrepresentation or omission of facts could cause another party to act differently if known. MMR can be shown if information is found that would have prevented the insurance company from accepting your small business application from the beginning. Withholding pertinent information in the context of your insurance claim could also lead to a claim denial.
Examples of material misrepresentation in business can include:
- Claiming a lower value for items such as machinery or vehicles to receive a lower premium.
- Failure to include all drivers on your commercial auto insurance application. If an accident occurs while an uninsured employee is operating the vehicle, your claim could be denied.
- Misrepresenting the address of your company or the location where the vehicle is usually stored to receive a lower premium. For example, busy metropolitan areas usually receive higher premiums.
It is important to always be truthful and accurate when conducting business dealings. If your small business is found guilty of omitting or falsifying facts, your insurer may be unable to approve your claim, and you could be left footing the bill. While a higher premium may seem like a tough pill to swallow, losses incurred from accidents, vandalism, or other covered circumstances can be much worse. Falsifying claims can lead to your insurance being completely voided. Be vigilant about maintaining organized records of your business dealings and be honest with your insurer. If you are curious about finding the right coverage for your small business, give one of our specialists at Infinity Insurance Agency, Inc. a call at 1-855-478-3705. They can provide you with a quote and guide you through the entire insurance process.
Accidents at work
No matter their size or staff number, it is up to small businesses to create a healthy work environment that follows both external and internal safety protocols. Nevertheless, even in the safest environments, accidents happen. Workers' Compensation insurance is a program that provides certain benefits to employees who are injured or become ill because of their jobs. These benefits can include medical care, temporary or permanent disability benefits, and death benefits. This insurance is paid for by the employer, and employees are not required to contribute. Although the legal requirements for workers’ compensation vary from state to state, it is generally mandatory that employers carry this coverage. Failure to do so could subject you to fines.
Fostering an environment that is free of workplace hazards and injuries can do more than prevent costly lawsuits. Building an ecosystem free of occupational injuries and illness can help increase productivity, boost morale, and build customer confidence. It is important to note that while Commercial General Liability Insurance helps cover many small business risks, it does not include worker’s compensation coverage.
Breach of contract
A breach of contract can include a lawsuit between businesses. If both companies agree to a specific contract and its terms and one company does not follow through with their agreement, that business can be sued.
Common contracts that small businesses enter can include:
- Confidentiality agreements
- Employee contracts
- Sales agreements
- Fixed price contracts
- Purchase orders
- And more
Contracts can be breached in several ways such as failure to deliver the correct goods, delivering damaged goods, or failing to pay for products received. A business could even be found in breach of contract by revealing trade secrets that violate a confidentiality agreement.
Importance of having an HR team
As a small business owner, investing in a Human Resources (HR) team can seem intimidating and possibly unnecessary. However, an HR team serves a vital role in marrying the needs of your employees and your company. From regular employee training to staying informed about changes in workers’ rights and legislation, HR teams act as guideposts, which can mitigate legal risks and ensure compliance in the workplace. A comprehensive HR team will plan for the future, establish a formal feedback system, and attract and retain the right employees.
Tips for small businesses on establishing or outsourcing HR functions
Small business owners may be wondering how to handle the duties of a full-fledged HR team with limited funds and employees. The most important HR functions for any company to cover are:
- Employee documentation - this includes I-9s, medical files, and all employee files
- Employee handbook - this should detail employees' rights as well as inform them of company policies, benefits, and insurance needs.
- Workplace notices - by law, your business must post notices that outline specific employee rights and safety requirements. Job site regulations can vary by state so be sure to check what is required for compliance in your state.
Depending on your business and budget it can be helpful to outsource your HR needs. When selecting an outside HR partner consider your company's specific HR needs such as recruiting, onboarding, compensation, benefits, and policies. Look for a reputable HR partner with user-friendly software, a responsive customer support team, and a wealth of experience with other small businesses.
Importance of having appropriate business insurance
The rising costs of materials, repairs, and medical expenses have left many business owners facing increased insurance rates. While it may be tempting to forgo or cancel your business insurance, the peace of mind it provides for small business owners is unparalleled. Small business owners should examine their unique needs and determine what type of essential business coverage they require:
- General liability insurance - also known as Commercial General Liability, or CGL, this is one of the most common insurance coverages for all types of businesses. This coverage helps to pay for claims against your company if a customer or an employee file a claim or a lawsuit against your business.
- Commercial vehicle insurance - if you utilize your vehicle for business purposes, personal auto insurance may not cover you from all contingencies. A commercial vehicle policy can help pay for covered losses regardless of fault for an accident.
- Business Owner’s Policy - this policy can help pay for damage done to your business by covering buildings, property within the building, and even lost income if an accident causes you to be out of business due to a covered accident. This can include circumstances like snow, fire, theft, wind, etc.
- Worker's Compensation - required by many states, this policy helps cover your employees' medical bills, ensuring that neither they nor your business must pay out of pocket for covered medical expenses, lost wages, and other related costs.
- Professional Liability - many companies that provide professional services or advice for their customers will need Professional Liability insurance for protection in case a customer is harmed by or dissatisfied with a service that is performed for them.
Business insurance is a worthwhile investment that can help provide both benefits and legal protection. No one plans for an accident or tragic natural disaster incident, but these events still occur. Securing the proper insurance can help save you from covering these losses out of pocket and help pay for repairs, replacement, and lost revenue. Failure to obtain liability or workers' compensation insurance may eventually lead to fines, loss of business license, or even criminal prosecution, in some states.
Ready to obtain business insurance coverage?
The biggest threat to foregoing business insurance is the costs to your business. Operating without adequate coverage can culminate in a perfect storm of unfortunate events including paying claim costs on your own, and maybe losing business. If you are nervous about your small business shouldering the costs, relax!
There are many ways to obtain adequate and affordable coverage:
- Assess your business's particular needs and determine what type of business insurance you require. Be sure to check your state’s website to determine the specific requirements necessary.
- Find a reputable and licensed agent. A commercial business agent can help you find the right policy that matches your small business's unique risks. An agent can also point out places where you may be paying for coverage you no longer need.
- Take your time, do your research, and shop around! Many insurance companies offer special discounts for small businesses which can include bundling multiple policies, group rates, loyalty discounts, and even safety discounts.
Interested in a free quote on your small business insurance needs? Call Infinity Insurance Agency Inc. at 1-855-478-3705 to get an estimate today!
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You pour time, money, and passion into your small business every day. So, why would you leave it unprotected and vulnerable to legal action? In a world of unforeseen circumstances, liabilities, and accidents it’s imperative to be proactive. Set your small business up for success when you onboard an HR team and obtain the appropriate business insurance. Measures such as attracting the right pool of candidates and insuring your company’s vehicle can pave the way for a smoother future for years to come.
Ready to prioritize your small business' success? Call IIA at 1-855-478-3705 today to get a free business insurance estimate!