Owners and managers of growing businesses are often so focused on customers, driving sales and expanding business, they fail to address internal issues that can also have an enormous impact on their business. You may have taken out adequate protection against certain liabilities such as insurance for errors and omissions, group health, public liability, loss of assets and profit and employee theft. Most companies also have an external review of their financial statements, or have an auditor do an internal audit.
But where many owners and managers are falling down is ignoring internal issues that also require review. For example, are you reviewing your human resource areas to ensure employees are working the hours they should, or that you have proper controls on inventory, and that cash controls are in place to guard against internal theft?
On the personal side, do you have a Will and is it up-to-date? Without a Will or failing to keep it up-to-date, you risk having your business fall into a quagmire of legal wrangling and crippling tax implications. The result could be your business being forced into liquidation or tied up in court for years leaving your heirs little or nothing in the end.
The company can be taxed out of existence, because it is subject to legal or tax rules that have changed since you wrote your Will. Also consider a second Will for private company shares, which may not be subject to probate.
When starting out in a new venture, partners can be so energized and focused on building a new business together, that a falling out or dispute in the future is the farthest thing from their minds. Make sure you have a Shareholders/Partnership Agreement that carries an appropriate buy/sell clause provisions and a method for a fair business valuation. Also consider life insurance funding for the buy/sell. Everything might seem rosy today, but relationships can sour and the business can be destroyed without the proper mechanisms in place.
A business can buy insurance for many of the risks it faces, but it is the not-so-obvious liabilities that can undermine and even destroy your business.