10-Point Legal Tune-Up for Your California Business

January 18, 2012

Your business, with the help of a California business attorney, needs to be maintained like any vehicle in order to prevent it from liability.  These 10-points are a start to help you maintain those weak points of your business.

  1. Corporate Formalities: Ensure management is adhering to corporate formalities. A very common trap that many incorporated business fall into is the failure to adhere to the basic formalities of your corporation, i.e. annual shareholder meeting minutes, annual filing of your statement of information, proper documentation of share transfers, etc.  Ask yourself why you incorporated in the first place–a major reason was to protect you as an individual from liability.  The bad news is that if you do not abide by the corporate formalities required by the state, it can contribute to stripping away this limited liability in the event of a lawsuit.
  2. Employment Policy: Review employment policies to make sure it is not out of date and still applicable to your size of businesses. You may have started your business with little to no employees.  As you hire more employees and the law changes, the applicable employment laws change and adjustments in your hiring and managing policies may be required.  For example, a workplace that has 5 or more employees has different laws that apply for companies that only have one.
  3. Employee and Independent Contractor Review: Review each employee and independent contractor for compliance with labor laws. Avoid the common mistakes of the confusion between an employee and independent contractor classification.  Review that each of your personnel is adhering to the current employment policies.  Review the local labor laws and make sure you are complying with all overtime, breaks, vacation, and work environment laws.  The penalties for misclassification do not stop with just labor law issues, but also tax liabilities as well.
  4. Contracts Review: Review each contract agreement for compliance. Gather all active contract agreements that you may have with employees, independent contractors, vendors, suppliers, customers, clients, partners, shareholders, etc.  Review them for your compliance as well as the other party’s compliance.  Check deadlines, termination dates, notice requirements, and other material terms.
  5. Review of the Disgruntled: Review every past dispute for potential liability. Every business will eventually encounter disputes with its vendors, customers and even with internal personnel.  Dealing with these disputes properly can prevent liability even where clear mistakes were made.  Reviewing conflicts with a former employee or a customer complaint can be a proactive way of managing legal risk as well as reviewing your businesses’ systematic procedure in dealing with complaints and customer satisfaction.
  6. Regulatory Licensing Review: Review all applicable regulations for compliance. Almost every business must comply with some special state and local regulations.  Whether you are a restaurant dealing with the county health department or a real estate broker dealing with the state department of real estate, you need to review for compliance.  Regulations tend to change more often than regular statutes passed by legislature.  Failure to comply to regulations in certain industries can shut down your business and open you up to further liability including fines and license revocation.
  7. Internet Technologies Review: Review online practices including social networking and privacy policy. If you have a website or involve yourself with social networking, there are some potential liabilities that are often overlooked.  Many businesses fail to adhere to its own privacy policies or have a privacy policy at all.  Social networking by you and your employees should be monitored as it is often susceptible to defamation claims and false advertising.
  8. Marketing Review: Review all online and print advertising for potential liability. Advertising from a legal perspective are representations of your product or services.  Liability may occur if the representations differ from reality, which can easily happen with use of out-of-date advertisements or if published without proper disclaimers and disclosures.  Review that your business is adhering to the representations made through all your advertisements that are in active circulation.
  9. Real Estate Lease Review: Review current real estate lease(s) for compliance. A real estate lease is often first contract a new business will sign and has long-term provisions that tend not been reviewed very often.  In most leases, there are multiple provisions that need to be reviewed over time including options to renew deadlines, rent adjustments and triple net cost calculations.  Without proper review, your landlord could take advantage or make mistakes that may prove more difficult to address at a later date.
  10. Tax Preparation and Review: Seek professional tax and legal advice regarding upcoming tax deadlines. Tax planning for a business is much more important than it for individual tax planning.  Accordingly, early tax preparation is essential to ensure you are complying with tax laws but also to ensure you are minimizing your tax liability.
How to Keep Your Business From Being Sued

By

Nasir N. Pasha is the managing attorney of Pasha Law, providing essential legal services and support to businesses and corporations in California, Illinois, New York, and Texas. He oversees all of the firm’s operations and is a pivotal force in maintaining client relationships and ensuring that each transaction is brought to its best possible conclusion.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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Latest Episodes

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