Running a seven-figure business comes with many rewards, but it also presents complex legal challenges that can impact your bottom line and overall success. From regulatory compliance to employee relations and intellectual property protection, business owners at this level need to be particularly proactive in managing legal risks. In this blog, we’ll explore the top legal challenges that these companies commonly face.
Regulatory Compliance
One of the biggest challenges facing any company is staying compliant with federal, state, and local regulations. Many state and federal laws are triggered by the number of employees that you have, so as you grow, you are likely to become subject to an ever-wider range of laws. For example, companies with at least 15 employees are subject to the Americans with Disabilities Act and Title VII of the Civil Rights Act, while those with 50 employees will become subject to the Affordable Care Act and the Family and Medical Leave Act. Likewise, as businesses grow, they often enter new markets and expand their operations, increasing the complexity of their compliance obligations. This could subject you to new industry-specific regulations or those that pertain to new territories.
Employment Law and Labor Issues
As mentioned above, as your company grows, your workforce is likely to expand. This brings increased exposure to labor laws and employment-related legal challenges. These include:
- Wage and Hour Compliance: Ensuring that your business complies with federal and state wage laws is critical. These requirements vary by state, and even innocent mistakes can result in costly repercussions.
- Employee Misclassification: It’s essential to correctly classify employees versus independent contractors. Misclassification can lead to back taxes and penalties. Misclassifying employees as independent contractors, failing to pay overtime, or not adhering to minimum wage laws can lead to significant penalties and lawsuits.
- Discrimination and Harassment: As your business grows, you may face allegations of workplace discrimination or harassment, which can harm your company’s reputation and lead to lawsuits.
- Employee Benefits: Ensuring compliance with healthcare, retirement, and other employee benefit regulations is often overlooked but can lead to costly penalties if not properly managed.
Intellectual Property Protection
Intellectual property (IP) is one of the most valuable assets of any company, and this becomes increasingly true as you become larger and more visible. As you grow, your IP becomes more valuable and also more subject to misappropriation. Your IP may include patents, trademarks, copyrights, and trade secrets. Failing to protect your IP can lead to costly legal battles and even the loss of a competitive advantage.
Contractual Disputes
Contracts are the backbone of any business relationship, whether with suppliers, clients, or employees. As a larger company, you are likely dealing with a significant volume of contracts, and disputes can be costly and time-consuming. Growth can also impede your ability to actively review and manage contracts yourself, as you may be accustomed to doing. By the same token, as the business grows and expands, you may encounter new and unfamiliar types of contracts or contractual language. Working with legal counsel can ensure your contracts are airtight, particularly with vendors, suppliers, and key employees. Contracts should clearly define expectations, timelines, and dispute resolution methods to avoid future conflicts.
Cybersecurity and Data Privacy
With increasing reliance on digital systems and data, cybersecurity and data privacy have become major legal concerns. Breaches can lead to regulatory scrutiny, lawsuits, and significant reputational damage. In addition, the larger your company, the more likely it is to be the object of a ransomware attack, where cybercriminals infiltrate your company’s digital infrastructure, encrypt its data, and demand payment to restore access to that data. Larger businesses are also more likely to serve large swathes of the country or planet. Regulations like the General Data Protection Regulation in the European Union and the California Consumer Privacy Act have set strict requirements on how businesses collect, store, and use personal data. Many of these laws are triggered only once a certain customer threshold is reached, and so are more likely to apply to higher-grossing companies.
Mergers and Acquisitions
As your business grows, you may consider mergers, acquisitions, or strategic partnerships to expand your market share. However, M&A transactions present a unique set of legal challenges, including ensuring adequate due diligence, negotiating favorable terms, and creating comprehensive documents to document the transaction and ensure the protection of your interests.
Managing a million dollar plus business brings numerous legal challenges, but with the right legal guidance, you can minimize risks and protect your company’s future. From regulatory compliance and IP protection to employment law and cybersecurity, addressing these issues proactively can help avoid costly legal pitfalls. Way Law is ready to work closely with you to minimize these issues and keep your business on the path to continued growth and success.