by Aleshia van der Ploeg, founder of VDP Legal Consulting (Pty) Ltd
As a business owner, you need to ensure your business runs smoothly and you need to mitigate your personal and business risk. Here are 5 ways to protect yourself in business.
1. Separate yourself from your business
If you are trading as a sole proprietorship, you are at risk in that you are personally liable for the debts of the business. This structure also does not cater for continuation of your business upon your death. It is advisable to rather ‘house’ your business in a Company. Companies are a separate legal entity and operate on the basis of limited liability. As a general rule, members are not liable for the debts of a company; however, there are exceptions to this rule. A company is the most recommended and likely structure for entrepreneurs as it provides optimal protection, flexibility and longevity. It is always advisable to keep work and personal finances separate. See my previous article regarding the Types of Business Entities in South Africa.
2. Ensure your business is built on a solid legal foundation
Business partnerships often end in ‘divorce’ because they’re not based on solid legal foundations. In other words, not enough legal groundwork is laid in advance. A prime example is the Zuckerberg/Winklevoss Facebook litigation.
If you are going into business with a partner/s, ensure that your arrangement is properly captured in a proper, valid and binding legal agreement.
3. Hire a competent attorney, accountant, etc.
A properly appointed professional can be invaluable to your business. They will properly assess your strengths & weaknesses, and mitigate your risk, which can save you a lot of time and money down the line. Almost every company should have a standard contract when dealing with customers or clients. An attorney can tailor a contract to your needs and build protection into your contract. Start-ups also encounter problems if when they do not have proper employment agreements in place. Every business should ensure they have properly signed employment agreements with their employees.
Another issue entrepreneurs face is not considering protecting their intellectual property. If you have a unique product or service, you need to consider protecting it. An IP Attorney can provide you with specialist advice in this regard.
Lastly, you should consider including legal notices and disclaimers in your information products and publications, literature, order forms, seminar materials, etc to properly protect yourself.
4. Insure yourself
All businesses should obtain liability insurance in case (for example), a customer was to slip and fall in your place of business. If you are providing a professional service, you need to consider professional indemnity insurance. It is always advisable to insure your goods / contents belonging to your business against fire, theft etc.
5. Watch what you say and do
To protect yourself and your business image, owners and their employees should avoid making public posts or statements which may be considered defamatory. You should also avoid conducting any business that might result in a conflict of interest or may be considered questionable – this means not doing business with unscrupulous individuals. (Example: Gupta-gate – if they take a hit, your company's name may be linked to them in the fallout).
For further information or assistance email firstname.lastname@example.org
Aleshia van Der Ploeg LLB (RAU) was admitted as an Attorney of the High Court in South Africa in 2006. She is a member of the Law Society of the Northern provinces. She has 10 years post-qualification experience in corporate, commercial, labour and general law. She practised as an attorney and served as a Director before forming her own consulting firm. www.vdplegal.co.za | Email email@example.com
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