Potential Business Liabilities to Watch Out For (And How to Protect Your Business)

Running a business comes with freedom, opportunity—and risk.

Whether you’re just starting out or growing fast, understanding your legal liabilities is essential to protecting your brand, your assets, and your future.

As a business law attorney, I’ve seen how one oversight can lead to lawsuits, fines, or even the downfall of a promising company. That’s why it’s critical to be proactive.

Here are the most common types of business liabilities to watch out for—and how to safeguard your business.

1. 👩‍💼 Employee & Contractor Liability

The risk: Misclassifying workers, failing to follow labor laws, or allowing a toxic work environment can lead to lawsuits for wage violations, discrimination, harassment, or wrongful termination.

Protect your business by:

• Clearly classifying workers as employees or independent contractors

• Following federal and state employment laws

• Having strong employment and contractor agreements in place

• Maintaining an anti-harassment and non-discrimination policy

Legal tip: Have all agreements reviewed by a business attorney before hiring. One misstep can cost thousands.

2. 📃 Breach of Contract

The risk: Failing to uphold terms in a written or verbal agreement can result in breach-of-contract claims from clients, vendors, or partners.

Protect your business by:

• Having all business agreements in writing

• Including clear terms, timelines, deliverables, and dispute resolution clauses

• Getting contracts drafted or reviewed by a legal professional

Legal tip: Never rely on verbal promises or generic online templates—they often don’t hold up in court.

3. 🧾 Tax Liabilities

The risk: Misreporting income, underpaying taxes, or failing to collect sales tax can trigger audits, penalties, and even legal action from the IRS or your state.

Protect your business by:

• Separating personal and business finances

• Working with a CPA or tax professional

• Choosing the right business structure for tax efficiency

• Staying compliant with sales tax and employment tax requirements

Legal tip: Your business attorney and CPA should work together to help you minimize legal and financial exposure.

4. ⚖️ Intellectual Property Infringement

The risk: Using someone else’s content, name, logo, or idea without permission—or having yours stolen—can lead to costly lawsuits or loss of brand identity.

Protect your business by:

• Registering trademarks for your brand name, logo, and slogan

• Avoiding use of copyrighted materials without licensing

• Using NDAs when sharing confidential information

• Monitoring your IP for infringement

Legal tip: A strong intellectual property strategy helps you secure your brand and stay ahead of copycats.

5. 👣 Personal Liability

The risk: If your business isn’t properly structured, you could be held personally responsible for business debts or lawsuits—putting your home, savings, and personal assets at risk.

Protect your business by:

• Forming an LLC, S-Corp, or Corporation

• Keeping business and personal finances separate

• Maintaining required corporate records and formalities

Legal tip: An LLC can protect your personal assets, but only if you follow corporate compliance rules.

6. 💻 Data & Privacy Violations

The risk: Collecting customer data without proper safeguards or failing to follow privacy laws (like GDPR or CCPA) can result in legal action, fines, and reputational damage.

Protect your business by:

• Having a clear, legally compliant privacy policy

• Securing customer data with encryption and limited access

• Only collecting data you actually need

• Disclosing how data is used and stored

Legal tip: Privacy laws are evolving fast—especially if you serve customers online or across state lines. Review your policy regularly.

7. 🔍 Product or Service Liability

The risk: If a product or service you provide causes harm, injury, or loss, your business could be held legally responsible—even if the issue was unintentional.

Protect your business by:

• Having clear disclaimers and warranties

• Obtaining proper liability insurance

• Ensuring quality control

• Including limitation-of-liability clauses in your agreements

Legal tip: Disclaimers and waivers should be reviewed by a business attorney to ensure enforceability.

Final Thoughts: Legal Protection Isn’t Optional—It’s Strategic

Every business has risks. But the difference between success and shutdown is often how well you prepare and protectyour business legally.

As a business law attorney, I help clients:

• Reduce risk through contracts and compliance

• Shield personal assets with the right structure

• Stay ahead of lawsuits, fines, and disputes

• Build a legally sound business that can grow with confidence

👉 Need help protecting your business from legal risk? Let’s work together to build your legal foundation and keep you protected. Book a consultation today.