Layers of Protection

Protecting your business isn’t just a one-and-done or isolated action. There are layers you need to insulate yourself and your business from liability.
 
 In this episode, we will talk about the Legal Trifecta—three tools you can use to protect the business you have worked so hard to build.
 
 Full show notes & links to resources mentioned: https://rachelbrenke.com/epi5/
 
 Join the Business Bites Podcast® group to chat about this episode: https://www.facebook.com/groups/104283060082956

Transcript

Speaker 1 (00:00):

Welcome to the Business Bites podcast, the podcast for busy entrepreneurs. Whether you are an online entrepreneur or seeking after brick and mortar success, this podcast brings you quick bites of content so you can learn and grow anywhere you are. Now, here's your host, Rachel Brain 

Speaker 2 (00:16):

Key. Welcome to today's episode on the Business Fights podcast. I am your host Rachel Brinke, and I am actually really excited as if I'm not excited every day, but I'm really excited for today's topic because I want to be bringing a little bit of the legal side and to help you guys protect your business. This episode is protecting your business in layers. I mean, so you're busy, your business is booming, it's rocking and rolling, and hopefully you have money coming in or else there's a plan for that money to come in. So you're acting like you're in business, but you get this creeping feeling that something might happen and you'll away from this entrepreneurial dream and you don't want to lose this. You've worked way too hard for this reason. You need to understand that protection tools work in layers. Think of layers of an onion. 

Speaker 2 (01:05):

If you've ever watched the movie Shrek, that's totally what I think about when he's like, I'm like an onion. I have layers. You know that you need contracts or other legal documents, or maybe you thought about your business formation such as its sole proprietorship or an LLC and maybe even a handful of you have thought about having insurance protection is best served in layers for your business. Each of these tools that I just mentioned offer some protection, but they work best in layers, not necessarily by themselves. I've actually affectionately referred to this as the legal trinity. I dunno if that's really a good accurate way that I should call it, because I really do feel like the layers kind of all pile on top of one another to protect you in case a liability or there's an issue that gets through one layer, you'll have another layer there that could potentially work to protect what you've worked so hard for. 

Speaker 2 (01:58):

So the very first tool I want to talk about is contracts. It really is a no-brainer that in this day of being in a litigious society, the contracts are a must. And when I say contracts, I guess I should say legal documents. I'm just talking about legal supports that you can have, whether you're working with clients or you're having shoppers on your website or visitors to a website and need things like a privacy policy or terms of use. But having these legal documents that are properly lawyer drafted and implemented in your business will help to inform your customers of policies. They provide hurdles to any issues a customer may have, and they provide a legal document that's to be referenced in situations. The second tool is liability insurance. Now, a lot of you, especially if you are a virtual based business, you don't have a brick and mortar, and especially if you don't ever meet any of your clients or customers in person, you may think, well, I don't need liability insurance. 

Speaker 2 (02:51):

You just never know what's going to happen. By having this layer, you can defer clients to this company to handle your issues for you. They can potentially resolve any potential liability issues that may arise, and this will free you up to focus on your business and hopefully reduce costs to extinguish any legal fires that may come up. And the third tool is that of business formation. And I actually kind of worked backwards here from the outer layer inward from the contracts and legal documents, then to liability insurance and then to your business formation, which is at the core of your business is what builds and creates what your business is. Whether you're a sole proprietor, limit a liability company which divides the business and personal assets for protection. And a corporation structure can do that as well with the formation at the core. If customers get through the last two layers that I just mentioned, then they have to engage in a legal transaction such as court or mediation or arbitration for a resolution. 

Speaker 2 (03:49):

So you kind of see how this will work a little bit for you. You've got all these little hurdles that your clients, these layers that they would have to get through. So lemme give you an example. Say that you end up with an extremely unhappy client or customer. You don't have liability insurance, but you are smart enough to form as an LLC. So when trying to settle the matter, you'll have to go all the way into court or just settle into mediation or arbitration to sell it. Whereas if you had a liability insurance policy in place that covered the legal issue that was at hand, you may have been able to have it handled in a shorter amount of time with a lot of less amount of money and hopefully a lot less stress. Unfortunately, many of you guys listening will check the legal marks on your checklist off and you'll never revisit these tools again or you'll leave some of these tools off the checklist and never get to them. 

Speaker 2 (04:36):

You need to set up a calendar reminder to revisit all your legal documents, disclaimers, insurance policies, and even your business formations as you grow and do all of this on a regular basis because as your business grows, your legals needs grow. I don't just say this as a lawyer, not just a lawyer, but I say this as a business owner, as someone who's worked so hard to build my brands, I don't ever want all those long hours and the tears and frustration and the successes to go down the drain simply because they didn't have these protection things in place. If you're one of those people listening that's like, I'm not even to that point yet, make sure that you get these tools under your belt before you even start taking any funds or acting like a business, whether you have clients, you sell a product or service, or you're assembly blogging and you're taking sponsors or you're selling online goods, you need to consider if you're acting like a business, you can be found to be a business and you are opening yourself up to liability as a business. 

Speaker 2 (05:36):

If you think you have all of this on lockdown, maybe you've been in business for a bit and consider that it is cheaper and easier to protect, to buy layers, then that's good. And I'm so glad you're there because it'll be easier than trying to scramble when an issue occurs. And this is why you guys are going to hear a lot more, a little legal undertones throughout the business bites from me that have centered on protection because my is to push preventive methods rather than those clean up on aisle four methods. Because the more protected you are, the more confident you'll be. This will also help you to stand firm when your clients or customers may be trying to steamroll you, and it'll also give you the ability to discern which policies to relax in the name of customer service and when to stand up against maybe if someone is trying to steamroll you, take advantage of you or maybe do something unethical or illegal. 

Speaker 2 (06:23):

So I hope this helps you guys just a little bit. That was a nice little crash course on the three layers. I do want to give you a little side note on a checklist, if you will, for each of these. So let's rewind a little bit to the tools and let's go back up to the legal documents. If you are having an online presence, at a minimum, you need to have a terms of use or a terms of service for the site, need to have a privacy policy, which is going to tell those that visit your site, what you're doing with the data that input into the site. And again, I should have prefaced all of this. Everything that I'm saying here is American based law of an American attorney. So if you are listening from overseas, welcome, welcome. But you may need to see if there's any other specifics that you need to have. 

Speaker 2 (07:07):

So again, that's a terms of use or service on your site, the privacy policy, and if you have any other agreements that you may have, if you're being hired by a client or if you're selling a product or service, you may need to have certain disclaimers or warranties. All of this needs to be in place. I really strongly recommend not saying this as a lawyer saying it is a business owner that any of these legal documents you need to have done by a lawyer, because there's a lot of underlying legal theories that we spend years and years learning that you may not readily understand and you don't want to inadvertently draft against yourself and hurt yourself even more in the long run. On the second tool of liability insurance, really recommend that you don't just try to add it on to maybe a homeowner's insurance or some type of personal insurance policies. 

Speaker 2 (07:55):

And this is especially true if maybe you're going to do also an equipment insurance on your laptop or other business equipment. Many times insurance companies will not cover actions and or equipment that's used in the course of business, even if maybe you're not turning a profit necessarily yet. If it's been used as though you're acting like in a business, then they're going to find it as though you're in a business and they're not going to cover you. And then the last tidbit on the tool number three of the business formation. If you're acting like a business, you're taking money, you're probably by default can be found as a sole proprietor. There's no division of assets, there's no legal protection between your business stuff and your personal stuff, and you're leaving yourself wide open. And so really take a good strong look at setting up as an LLC or a corporation for your state to give you that nice little division, and you can also added tax benefits that are available for you as well. 

Speaker 2 (08:49):

So I hope these three tools, these layers of protection have shown you guys that you and given you a nice little checklist that you guys can go through to protect all the effort and the time and the resources and the energy that you've put into your business. I don't want it to be gone in the blink of an eye simply because you get an upset client or something occurs and you end up having to spend all your time and money, even if you are not in the wrong or if you didn't do anything, the time of money spent into illegal action can actually make businesses go under. I'd hate to see that happen to any of you guys. Thanks for listening today to this episode of the Business Bites podcast. I really hope that you enjoy this. Please take the checklist with you, reevaluate them. I suggest on a quarterly basis at a minimum, if not monthly, for some of your contractor policies that you're putting out to your clients or customers. All right guys, have a good one. 

Speaker 1 (09:44):

Thanks for joining Rachel on this episode of The Business Bites. For show notes, a list of recommended tools or referenced episodes, you can find them@businessbytespodcast.com. Until next time.