3 Ways Business Owners Can Reduce Liability Today, Tomorrow and Beyond
Here’s a great article by DelanceyStreet.com, a financial startup that provides hard money loans and does reverse mergers for companies. Few notions in business are as romantic as the overnight success story. But in reality it usually takes years for an upstart to become a national or international powerhouse. More often than not they started off small, having spilled blood, sweat and tears taking the entity from small business status to the cover of Forbes, or even the Fortune 500. And as any business grows, it is often forced to adapt and contend with new obstacles and considerations. One major consideration is liability. To the small business owner, liability likely means little more than making sure a customer doesn’t slip and fall. But as an operation expands, it becomes more susceptible to personal injury lawsuits. Here’s how any business in the growth period can protect against tort liability.
Form an LLC
Before realizing that dream of a successful IPO, business owners must first decide the extent of their personal liability regarding their operation. This is where LLCs come in. Incorporating at all protects against a wide range of risk, while setting up a limited liability company is an even more effective way to batten down the hatches, so to speak.
It also eliminates many complications. Corporations are often beholden to myriad state rules, such as mandatory board meetings, structural management, and too many cooks in the kitchen in the form of shareholders, officers and directors. Those who want to streamline their operation while enjoying enhanced protections will likely feel an LLC suits them. It offers greater protection against creditors (provided the business owner isn’t forced to accept personal liability by his or her bank), and it protects the organization from the personal liabilities of the owner. Win-win.
Of course, there are still regulations where it concerns LLCs, and these vary by state. Those who want to know more about the ins and outs according to their particular location can check out this handy guide.
Google, not merely content with dominating Silicon Valley, has manufactured a prototype of a driverless automobile. Now they have their sights set on being the first company to deliver a self-driving car to market within five years time. Obviously, auto industry insiders have sat up and taken notice. However, any business owner with an interest in limiting consumer liability should follow these developments as well.
This is because the technology that has allowed for self-driving cars will effectively create a product the consumer isn’t even required to use. And if the expert predictions are correct, and there is a drastic reduction in the some 30,000 annual U.S. car crashes, then expect personal injury lawsuits against auto manufacturers to keep pace. In this new reality it’s hard to imagine businesses across all sectors not taking notice of such a significant drop in litigious behavior. So, expect ingenuity regarding automation to be forefront in the minds of all modern industrialists from this point forward.
Hone the waiver of liability
Waiver of liability forms have long been a popular hedge against personal injury lawsuits. And these documents will continue to be a part of tort reality for the foreseeable future. After all, man may be able to automate cars, but there is likely to be little need for skier-less skis or jumper-less bungees in the coming years. So it makes sense for owners who run businesses that ask customers to participate in activities or events to protect themselves with signed waiver of liability forms.
The catch? Language in these waivers can be tricky, and therefore they are not always upheld in court. In other words, business owners who opt for a waiver are only ever rolling the dice where their liability is concerned. But there are ways to turn the odds in the favor of the business, such as ensuring the language in the waiver is ironclad. Some other effective methods may seem counterintuitive.
For example, a business owner who runs a white-water rafting tour company may be inclined to bury any risk-of-death protections deep in the fine print. (After all, spelling out in no uncertain terms that a person may drown in the activity he or she paid for isn’t an attractive option.) However, courts may find this behavior to be underhanded, and often decide that the customer did not sign his or her right to sue away. Best to get it all out up front; after all, reasonable people who are spoken to honestly often don’t have a problem acknowledging minor risks inherent in certain activities.
In the end, protecting a business from personal injury lawsuits goes beyond merely posting “wet floor” signs and making sure the coffee isn’t scalding hot. How vulnerable a business owner is to litigation depends as much on how they set up their operation-and the technology and philosophies involved-as it does on implementing proper safety protocols. Those business owners who want to learn more about negligence and risk can find the particulars here.