Hunt & Associates P.C.

Managing Against Legal Threats to Your Business: The Value of Annual Meetings

Most businesses operate in a legal jungle full of potential threats to their life and profitability. A single successful employee claim for wrongful discrimination or harassment; litigation between shareholders; an environmental claim; or the death of a principal; can, in many cases, break a small business which had been profitable and growing. These are just examples of the wide range of legal threats to your business.

Yet businesses frequently ignore these threats until they become real, inescapable and horrendously expensive problems. Instead, many profitable small businesses operate serenely oblivious to their legal vulnerabilities. Like most of us, they prefer to focus on what’s most comfortable and immediately rewarding. However, the reality of any business is constantly changing with the aging of ownership, death and divorce, the arrival and departure of employees and managers, changes in the marketplace, new taxes and new laws.

Often businesses, intent as they are on daily operations and future business growth, fail to address and protect themselves from the changing legal hazards they face. Those hazards are both managerial and organizational. Managerial legal threats such as those arising from the treatment of employees, customers or vendors require the adoption and enforcement of clear policies which protect the business. Organizational threats include owners’ divorces, death and other succession disputes, expansion of equity ownership, and disagreements among owners resulting in stalemate or litigation.

Nonetheless, many small business owners do not confront these issues in a regular and disciplined manner. All too frequently small businesses simply avoid thinking about the very problems that could most easily kill them.

One reason annual meetings of a corporation’s directors make sense is such meetings give those ultimately responsible for the governance of a corporation to review the management and organization of the business in a disciplined manner to anticipate and minimize the risk of legal hazards to their corporation. The same is equally true for managers of limited liability companies, partners in partnerships, and anyone else with ultimate responsibility for overseeing and guiding the future operations of a business.

Annual meetings are a good place to discuss issues which may affect the business both in the short and in the long run. An annual meeting is a good place for a small business to review its employment policies and practices, its management and organizational structure, anticipated changes in ownership planning for succession in ownership, and a multitude of other issues from expansion to contraction from taxes and accounting to insurance.

Such meetings should often if not always include at least the limited participation of the professionals who advise the business including accountants, attorneys, and possibly insurance agents, property managers and others who provide ongoing services to the business. The participation of professionals generally will help to ensure that decisions reached in the meeting are well informed and that any professional work needed to implement a course of action chosen in the meeting does occur.

© 3/08/2011 Lawrence B. Hunt of Hunt & Associates, PC

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4 Responses to Managing Against Legal Threats to Your Business: The Value of Annual Meetings

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