As published on Forbes.com

Print This Page

It’s January and you’ve already thrown in the towel on losing weight, exercising or quitting anything bad.  Well, at least get your business into good legal shape. Here are five key commitments that will improve—and may one day save—your company.

1. Clean Up Your Contracts. A good contract does not stay good for long. The world is changing fast. The government has written new laws, other businesses have been innovating and society has gone through all kinds of revolutions. If your business is going to keep up, you need to update your agreements.  A decade ago, you didn’t think your contracts needed to address tariffs, gig workers or parental leave.  Plus, plenty of contracts weren’t so great to begin with. Yes, especially the ones you copied from the internet (you know who you are, Gary).

We all got very lucky with the U.S Constitution—but even that had to be amended a couple of dozen times before we mostly got it right.  So enough already with the outdated agreements.

2. Update Your “Corporate” Documents. Your business should not be relying on your original “vintage” shareholder or operating agreement. Years ago, you were broke and impatient.  You didn’t even read the document before you signed it.  Even today, you don’t really know what it means. You’re thinking, “WHO CARES? I’ve got a business to run.”

On occasion, though, these documents are supposed to do some heavy lifting.  If you retire, you and your family could end up with millions of dollars … or maybe nothing, depending on the wording of that boilerplate contract.  Likewise, you may want to sell and your partner refuses to agree because she plans to die at her desk.  No, her “brilliant” idea is to bring in investors, which makes you want to die at your desk.  You could end up in a stalemate over countless big decisions and not have any effective solutions. Do nothing and the world of money-eating litigation awaits you—or your heirs.

These agreements aren’t around for when they’re not needed.  They’ve got a job to do. They’re supposed to solve big problems, not create them. Draft the corporate documents that you need for your business and your personal goals.

3. Comply with New Employment Laws. If your employment policies and agreements complied with the law ten years ago, then they’re about a decade past their “use by” date. Consider the following legislative “achievements.” Nevada just passed a law preventing employers from rescinding an employment offer if a worker fails a drug test. Illinois joined a slew of other states in prohibiting confidentiality provisions in severance and other agreements. Effective January 1, 2020, Washington state prohibited most noncompete agreements. New employment laws are popping up everywhere, regulating hairstyle discrimination, overtime pay requirements, and prohibiting once customary employment practices, like on-call and double-shift scheduling.  In other words, many of your employment policies and agreements are illegal.

If you’re not ready to sell, retire or spend your days in court (and nights writing checks), you have no sane choice but to overhaul your workplace rules.

4. Review Your Insurance. If you’re happy with how much your insurance costs, you’re not doing it right. Too many businesses are just buying deductibles and excuses—not real insurance. Unless you’re an expert, you can’t see the holes in your policies. Once the water or smoke starts creeping under the front door, it’s too late to get real insurance.   Plus, business risks have morphed.  Do you have cybersecurity insurance?  If not, what’s your game plan for the hacker who steals customer data, locks up your servers and then demands half an octillion of bitcoin as a ransom? You need real coverage for the problems you may face one day—or tomorrow.
5. Adapt to New Laws Affecting Your Industry. You’ve had your nose to the grindstone keeping online customers happy and beating out the likes of Amazon in your curated niche of the world. So what?  The government is about to take all of your money anyways for violating a slew of new privacy laws. In 2019, the European Union’s General Data Protection Regulations went into effect. The EU promptly fined Marriott over $100 million for data disclosures by Starwood, now a Marriott subsidiary.   The U.S. Federal Trade Commission (FTC) has its own privacy rules. In late December, Google agreed to pay the FTC a fine of $150-200 million to settle alleged privacy violations.  That’s chump change.  Earlier in 2019, the FTC slapped Facebook with a $5 billion fine for data misuse.  Ouch, that stings.

We’re just seeing the tide roll out before the tsunami rolls in. California adopted broad new privacy rules.   New York state has jumped in, plus Nevada and Maine. Lawyers are starting to camp out at the courthouses—and that’s just from the new privacy laws. You need to survey the laws that apply to your industry and then make the changes necessary to survive, maybe even thrive.

Every business that’s been dragged into court and lost a big judgment or been slapped with crushing fines thinks about one thing.  They really wish it hadn’t happened. But we don’t have time machines. There’s only one way to avoid all of that misery.  Prevention.

Success in business isn’t just about making money. It’s also essential not to lose a ton of it. In 2020, resolve to get your company in good legal shape.