17% of small to medium businesses have over $100,000 in debt. However, since 28% have no debt whatsoever, there’s no reason to fret about business liabilities from the get-go. With appropriate legal assistance and quality risk management, you can mitigate the possibility of debt due to outstanding liabilities.

Here, we’ll discuss legal pathways for managing business liabilities with an experienced attorney. Read on to protect your business from debts, lawsuits, and other unexpected occurrences.

Know Your Specific Liability Risks

Business liabilities are the financial obligations that a company owes to other entities. These entities include creditors and employees. They also include government organizations.

There are two common types of liabilities. Current liabilities refer to outstanding financial obligations that your business needs to resolve within one year. Non-current liabilities are due past the one-year mark, so they are less immediate concerns.

Some common liabilities include:

• Employee wages
• Insurance and other benefits for employees
• Money your business owes to suppliers
• Taxes payable, including income and property taxes
• Long-term loans from banks and private creditors

Managing liabilities ensures that your company:

• Meets its obligations
• Remains reputable
• Avoids lawsuits
• Stays compliant with government regulations
• Avoids fines from external entities

A business liability risk is a potential legal obligation that your company can contend with.

When these risks become reality, your business owes money to more third-party entities. In short, more business liability risks mean more money owed.

Some common types of business liabilities might include:

• Defective goods and services
• Property damage
• Failure to pay pre-existing obligations
• An inability to track taxable income
• Slip-and-fall accidents or machinery-related injuries that lead to lawsuits
• Data breaches
• Copyright infringement (accidental or purposeful)
• Future transfers of business ownership

Look into your business’s history and determine what liability risks you need to face. Discuss potential liabilities with business leaders and other important shareholders. Then, talk with a reputable corporate attorney about potential risks and how to mitigate them.

Choose an Appropriate Business Structure

Newly forming businesses will need to choose a business structure that works for them.

A sole proprietorship is a business structure for companies that are owned and operated exclusively by one person. If the business incurs debts, that individual is responsible and must pay with personal assets. While it’s easy to set up a sole proprietorship, it offers minimal protections, and all the profits are taxed as the proprietor’s personal income.

Partnerships are a structure for businesses owned by two or more people. They’re easy to form, but partners are personally liable for business debts.

A limited liability company (LLC) is usually better for smaller startups. These are flexible structures that offer some liability protection. Owners do not have complete liability for business debts, and business owners can choose whether to be taxed as a pass-through entity or a corporation.

Corporations are the hardest type of business structure to implement, but they offer the most liability protection. They’re completely separate legal entities from their owners and shareholders only have a limited liability for debts the business incurs. They’re taxed as their own entities.

Corporate lawyers at Boyer Law Firm can help you:

• Assess your business needs
• Understand the legal implications of the different business structures
• Figure out your long-term business goals and what structure will help you best meet those objectives
• Inform you of the tax implications for each option
• Comprehensively fill out legal paperwork to form your business
• File that paperwork with the appropriate entities

Consider Business Liability Insurance

If you are concerned that your business lacks sufficient insurance, you’re far from alone. 90% of business owners have the same concerns. 53% also said that their anxieties stem from not knowing precisely what plan type their business needs.

Talking with your lawyer about business liability insurance plans can help you ease these concerns and mitigate risks. They can help you choose between:

• General liability insurance, the most basic package that covers costs if your business accidentally causes property damage or an employee gets injured
• Commercial property insurance that offers coverage for your physical property in cases of theft or natural disasters
• Business owners’ policies (BOPs), which is a combination of general liability insurance and commercial property policies
• Professional liability coverage that protects your business against the ramifications of professional mistakes, such as errors or omissions
• Workers’ compensation packages that protect you from personal injury lawsuits from employees who are injured on your property

A legal professional can help you understand the ins and outs of various policies. This will give you the confidence needed to make an informed decision.

Develop Risk Management and Response Plans

Planning for unexpected liabilities is one of the most important ways that you can legally protect your business. Train your employees well to make sure that they know how to do their jobs without injury. Teach them how to work with data and prevent cybersecurity breaches.

This is just the first step of developing processes that lower liability risks.

Create timelines for paying back debts. Track the costs of your expenses meticulously and ensure that your building has regular maintenance and cleaning schedules.

Additionally, work with attorneys to draft binding business contracts with:

• Clear, specific terms and conditions
• Liability waivers
• Liability transfer clauses

This is a great way to mitigate the risk of mistakes and unclear agreements.

It’s also important to have a thorough response plan for when issues do emerge. Think about how you can protect employees and clients if a liability occurs and in what ways you can prevent a lawsuit. Know how your business would respond if sued and develop a clear communication plan.

This ensures that you are prepared for any situation that you find yourself in.

Mitigate Business Liabilities With Professional Help

Now that you know some legal pathways to help with managing business liabilities, it’s time to consult with an attorney about risk management and protecting business assets.

Boyer Law Firm is committed to offering robust business and commercial law services to deal with complex legal matters. Our 10.0 Avvo rating and many years of experience make us a top choice for small and medium businesses in Florida, and we’re excited to sit down with you and discuss your specific liability concerns.

Contact us for a free consultation to learn more about how our team can meet your specific needs!