Building a Strong Corporate Legal Framework: Foundations for Long-Term Success
Are you looking for ways to protect your business from lawsuits? You should make a corporate legal framework.
The right business legal framework helps you to lay a proper groundwork. This sets up your business for long-term, successful growth. It also drastically reduces the chances of you facing lawsuits or legal problems.
As the owner of a company, this article provides you will essential information about how to build a business legal framework. The right framework will help you to protect your company from lawsuits and legal problems.
Here is what you will learn:
How business legal framework is important
How to build a business legal framework
Components of a business legal framework
Pitfalls to avoid
Why Business Legal Framework is Important
The legal framework of your business is similar to the foundation of your house.
If you don't have a strong base then everything else will be at risk. The same is true for your business. A weak legal base will result in catastrophic failure of your business.
But here's something else for you to know…
85% of general counsel believe that corporate risk and legal will increase even further in 2025. This means that legal risks and problems are only going to increase with time.
Businesses have to find ways to handle the legal risks that are increasing with time. Professional corporate law services can help your business to have the right corporate legal framework.
This will help you to build a strong foundation which can sustain changing regulations and business needs.
Corporate legal framework helps your business to:
Protect itself from lawsuits and other legal problems
Reduce liability exposure
Stay updated with regulatory compliance
Attract investors and partners
This is why businesses need to have a strong business legal framework.
Components of Business Legal Framework
Having a business legal framework is not a difficult thing. But you have to pay attention to some important areas in order to make your framework complete.
Let's discuss some of the important elements of a business legal framework.
Business Governance
Business governance is the foundation of your business legal framework.
Business governance system provides clarity on who makes decisions, who has the authority and how accountability is maintained in your organization. This system will help you to prevent confusion, conflicts and legal issues.
Business governance is composed of these important elements:
Business structure and its responsibilities
Shareholders rights and agreements
Decision making process
Dispute resolution procedure
Compliance Program
Many businesses make a mistake regarding business compliance.
Compliance is not something you can set up once and forget about it. Compliance is a continuous process and you need to keep paying attention to it.
70% of professionals state that there is a shift from "check-the-box" compliance to strategic compliance in 2024. This means that businesses are having to develop more advanced systems in order to comply with regulations.
Business compliance program should include:
Regulatory compliances that apply to your business and industry
Internal policies and procedures
Employee training and education
Audit and assessment
Business Risk Management
Every business has to deal with risks. The only question is whether you are proactively managing them or simply reacting to problems.
Business risk management is an important part of your business legal framework. Risk management will help you to find problems before they start costing your business money.
Business risk management should include:
Contract review and management
Insurance coverage review
Crisis response plan
Audit
Documentation System
Documentation is your best protection against legal issues and lawsuits.
In case any dispute comes up in your business, it will be documentation which can help you win or lose the case. You must have a documentation system for every activity that happens in your business.
Pitfalls to Avoid While Framing a Business Legal Framework
Let me tell you about the business legal issues that you should be most careful about.
Employment Laws
Businesses have the most problems with employment laws and employee disputes.
Employee can sue you for all kinds of employment law violations. These include issues like wrongful termination, wage disputes, discrimination, harassment, and so on.
Employment related issues are the costliest legal issues which businesses face. The only solution is to establish clear policies, maintain proper documentation and update yourself on changing employment laws.
Contract Management
Poor contracts can cost your business a lot of money. The biggest problem businesses have is with handshake deals.
Handshake deals and sloppy, poorly written contracts can give rise to numerous legal issues in future.
Every relationship your business has with its customers, vendors, partners and employees should be governed by a well-written contract.
Intellectual Property (IP)
Intellectual property is the most valuable asset of your business.
In order to protect your IP you will need trademarks, patents, copyrights and trade secrets. If you do not protect your intellectual property, then others can legally use your innovative ideas, brand elements, designs and so on.
Corporate Formalities
One of the biggest mistakes that many small businesses make is to run their business as sole proprietorship even though it is a corporation or LLC.
Corporations and LLCs have certain formalities which you are required to maintain. If you fail to follow the corporate formalities, then courts can go after your personal assets in case there is a business liability.
How to Build a Business Legal Framework
You should start with a legal audit in order to identify the current structure of your business. A legal audit will help you in identifying the gaps and areas of risk.
You should prioritize your needs based on the level of risk. If your company has been around for a long time then you may not be able to fix all your problems at once.
You must create documents for your business. You should have written policies and procedures for all your business operations.
This will help your employees and it will also help you in the case of any dispute. You should have these documents updated regularly.
You must review your legal framework regularly in order to keep it updated and relevant. In case of high risk areas you can conduct a review on quarterly basis and for lower risk areas you can review it on annual basis.
You must train your employees about legal responsibilities. Regular training will make them aware of their legal responsibilities and they will be able to identify potential legal issues.
You should have a good working relationship with experienced attorneys. Rather than having to find legal help whenever you need them, you should find an experienced attorney who can understand your business and industry.
Conclusion
Building a good business legal framework is a must for businesses that want to grow and succeed in the long run.
But if you build the right legal framework for your business, then maintaining the framework will not be difficult. You will have more time and energy to focus on your business as you will have to spend less time on dealing with legal issues.
I think you can take advantage of this when I state that 51% of legal leaders now view disputes and investigations as their main risk factors. This means that businesses which have a proper business legal framework will have a huge advantage over those who do not.
Start working towards building a good legal framework for your business. You can do so by starting with a legal audit and working on the most risky areas first.