Three Legal Fixes For Your Business That Will Save Problems Later

When building your business and your future, you need to make decisions that will take you where you really want to go. So many things can lead you away from your long-term goals and what’s truly most important to you: a lapse in judgment in a move with only short-term results in mind, failure to consider consequences, a weakness in integrity, or an ill-considered shortcut.

Regardless of the size of your business, these tips can help you and your business succeed. I hope that reading about our firm’s personal experiences from actual corporate clients will help you avoid some of the common pitfalls that can damage your business and even have personal financial repercussions.

1. Practice Prevention. The old adage regarding medical care – an ounce of prevention is worth a pound of cure – also applies to legal questions. Lawyers are called upon to help businesses out of serious situations that could have been prevented if the business owner had met with a lawyer prior to entering into the transaction. Attorneys are counselors and are trained to anticipate problems before they occur and provide advice that will prevent legal problems from occurring in the future.

For example, are you about to enter into a business transaction with an out-of-state company? Does the contract contain a provision that will allow you to be sued in another state even though you do not do business there? Does the contract provide adequate remedies to you if the other party fails to honor the contract? A lawyer can help you will all of these questions before you sign the contract.

We had a client who invested over $400,000 in a food establishment. Without consulting an attorney, he had written an agreement with his partners but only later, when he wanted to remove them from the company, did he realize that his agreement was so poorly written that he was stuck with them for years. A pre-transaction review by a lawyer would have saved him a lot of money and perhaps his restaurant.

Although this first tip is simple, practicing prevention is the best way to avoid trouble and keep your legal costs under control.

2. Keep Business Records Up To Date. Maintaining all of your business paperwork can be a headache, and it is only human to postpone unpleasant activities. Resist the urge to procrastinate. Instead keep your business records up to date. All business records, including corporate records, tax, and banking records should be kept as current as possible. Out of date corporate records could jeopardize your corporate status. Your other business records need to be current so that you can always have an accurate picture of the financial status of your business and have quick access to records you might need for any emergency loan or other transaction.

We represented a reseller of telephone services who sued a major telecommunications provider. Unexpectedly, the major carrier counter-sued and made claims against our clients personally. They had failed to keep corporate records for years and were left without any shield to protect them from the large company. It is nearly impossible, years later, to remember all the important decisions that were made and to try to reconstruct them in writing.

3. Maintain Adequate Levels of Insurance. Clients often ask me whether or not a particular business transaction exposes them to the danger of legal liability. It’s a common question, because nobody wants to be sued. Although the chances of a lawsuit against your business have been blown grossly out of proportion, there is some risk in operating a business. Practicing prevention can go a long way towards limiting those risks. For risks that cannot be limited or eliminated entirely, insurance is the best answer. Insurance can not only pay claims but also pay legal fees in the event of a claim.

Has your insurance grown with your business? Many businesses have adequate levels of insurance when they first begin operation but forget to increase their insurance coverage as the business grows. Your disability insurance, your general liability insurance, your fire insurance and other appropriate insurance should be maintained at a level that will ensure the continuation of your business in the event of a worst case scenario. Trying to save a few pennies by cutting corners on insurance is a dangerous game to play.

A corporate client of ours fixes business doors. This client was sued by someone claiming he was injured by one of the company’s doors. This client generally has adequate insurance, so you might think the lawsuit wouldn’t be a problem. However, at one point, their prior insurance carrier had discontinued all its policies of a certain class. Our client asked for a two-month extension so they could obtain new coverage, which they found less than two months later. Great ending? Not quite. When the first carrier sent the bill for the two-month extension, our client decided not to pay it. The two months was over and they had new coverage, so it seemed better to use the money for the new coverage. A year and a half later, they were sued for an injury that allegedly occurred on a date that was exactly in the middle of those two months. Of course, the first carrier refused to cover the claim since the premium was never paid. The lawsuit claims damages of $5,000,000 and our client has no coverage because they decided to save $1,200 for the two-month premium.

We work with all our clients to ensure that their business and legal choices and decisions are in keeping with their long-term and broader life goals.

To receive even more great legal tips to help your business avoid common pitfalls, contact us at (212) 661–7010 or (973) 365–2770 or email us at

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