By: Jaiden Moore
Running a business involves a variety of risks. Some of these risks have the power to completely dismantle a business, while others have the power to seriously damage it, making repairs expensive and time-consuming. Business owners, no matter how big or small the business is, may foresee and plan for risks that are inherent in doing business. Risks are being taken by small business owners every day. However, putting too much at stake could affect your net income. To ensure that you are making the right decisions, conduct a risk assessment for your small business.
While many people are involved in the process and several factors are considered, executing a thorough risk assessment boils down to three main components: risk identification, risk analysis, and risk review.
risk identification
To properly address hazards and risks in the workplace, they must first be correctly identified. The goal of risk identification is to identify what, where, when, why, and how a situation can hinder a company’s ability to function. For example, a business located near the Gulf of Mexico would list “the potential for hurricanes” as an occurrence that could interfere with normal business operations. This will enable you to minimize harmful risks before they arise.
here are some ways that a small business owner can identify risks:
Brainstorming:
To brainstorm is to take a holistic view of the business you are developing. In doing this, you want to think about any challenges you anticipate as well as anything that you are unsure about.
Thinking Pessimistically:
Generally, pessimists have a gloomy or skeptical outlook. While pessimism is typically not encouraged in the workplace, asking yourself “what is the worst thing that could possibly happen to the business” is a good way to identify risks.
Imagining Yourself in the Employee’s Shoes:
Even if you are a new business owner and currently operate as the sole employee, employee perceptions of a business’s dangers can be very different from those of the business owner. In their regular work activities, employees can come across new threats that were not previously noticed or anticipated. As a result, putting yourself in the employee’s shoes can give you a good sense of what could go wrong.
risk analysis
After you have identified potential risks, you must prioritize them in accordance with an assessment of their likelihood of occurrence. With this in mind, establish a probability scale for the purposes of risk assessment.
For example, risks may:
- Be very likely to occur;
- Be somewhat likely to occur;
- Have a small chance of occurring; or
- Have little to no chance of occurring.
Failure to appropriately assess risk likelihood can have serious implications. If you underestimate the likelihood of an incident, you might not take the appropriate preventative measures, which can result in expensive mishaps or even fatalities. The opposite is also true: if you overestimate the likelihood of an event, you could take unnecessary precautions that cost you time and money.
risk review
Once you have established a list of potential business risks and determined each risk’s likelihood of occurrence, detail them in a document. Develop a method to evaluate the impact of each risk, then consider the extent of the potential harm and the difficulty of recovery. Determine the controls you may apply to limit potential risks. To predict your revenue cycle, look at patterns over time. Additionally, evaluate the effect risks have on your business, and consider a risk’s importance as well as the possibility that it will affect your business.
Periodically review your risks. Your risk assessment is not a one-time commitment; it is instead an ongoing an ongoing responsibility. At the end of each year, you should evaluate your risk management procedures to assess how you manage risks. Additionally, keep an eye out for emerging risks that may not have been significant during the prior evaluation.
CONCLUSIONS
Risk assessments are an essential component of managing a business. Your business risk assessment can be used to inform decisions about funding. A quick risk assessment will assist you in avoiding problems that could impact your finances. You learn from the assessment what actions you should take to safeguard your company. This will enable you to recognize the situations you need to deal with, and steer clear of. In addition to helping you internally, a financial risk assessment can aid in your readiness for financer interactions. Before lending you money, these people want to know how risky your business is. They consider the potential of your business expanding as well as your likelihood of repaying the loan. By putting the aforementioned risk assessment methods into practice, you may control any potential risk to your business. Prepare your risk assessment plan so that you can take the time to identify and manage the risks that your company faces.
This post has been reproduced and updated with the author’s permission. It was originally authored on January 31, 2023 and can be found here.
Jaiden Moore, at the time of this post, is a second-year law student at Penn State Dickinson Law. He has a B.A. in Liberal Studies from North Carolina A&T State University, and is interested in civil litigation. Jaiden is Treasurer of the International law society and is a member of the Black Law Students Association as well as the Business Law Society at Dickinson Law.
Sources:
https://safetymanagement.eku.edu/blog/risk-identification/
https://www.assp.org/news-and-articles/conducting-a-risk-assessmenthttps://www.patriotsoftware.com/blog/accounting/small-business-risk-analysis-assessment-purpose/
https://www.projectmanagement.com/contentPages/article.cfm?ID=274371&thisPageURL=/articles/274371/Brainstorming-Risk#_=_
https://www.berkeleywellbeing.com/pessimism.html#:~:text=Pessimists%20typically%20have%20a%20gloomy,t%20willing%20to%20take%20risks.
https://www.investopedia.com/articles/financial-theory/09/risk-management-business.asp
https://www.lucidchart.com/blog/risk-assessment-process
In January 2023, Meta abandoned its San Francisco office, an office space with 400,000 square feet in downtown San Francisco.1 Meta had rented out the space five years earlier to make space for the employees behind Instagram. The lease termination was eight years early, as Meta’s lease was set to expire in March 2031.
Your commercial lease is likely to have a clause that addresses your surrender obligations. In general, the tenant must return the commercial property, such as an office space, to a broom-clean state. A broom-clean state means all of the tenant’s personal property is removed from the premises. Alternatively, some commercial leases will allow the tenant to return the space as-is. An as-is return is favorable for the departing tenant because it allows the tenant to leave the property in its current condition and with any existing faults. If your commercial lease already demands a broom-clean return, it might be worthwhile to negotiate with the landlord for an as-is return.
Instead, the amount and the return of the security deposit are up for negotiations in Pennsylvania. Thus, landlords and tenants in Pennsylvania must be intentional when reserving their rights to the security deposit when they enter a commercial lease. Lack of a security deposit provision in the commercial lease may limit a tenant’s rights if she decides to terminate early.
Small business and start-up companies incur a variety of costs to operate their businesses. However, no matter the size of a business, energy consumption ranks among the top five business expenses. The primary use of energy includes operating vehicles, heating and cooling, and operating equipment. The ability to cut down on fixed costs such as utilities may significantly improve cash flow. According to the U.S. Energy Information Administration (EIA), the average monthly utility bill for commercial buildings is $650 per month with the northeast region averaging a higher cost of $727 per month. The cost of electricity and natural gas is only expected to rise in the coming years and remain volatile. Whether your company has been in operation for years or is beginning to get off the ground, managing and saving on energy costs is not only beneficial for the business but also for the environment. With the recent enactment of the Inflation Reduction Act (IRA), small businesses are incentivized to deploy clean energy technology to reap significant cost-saving benefits.
Under the IRA, the ITC enables business owners to receive a one-time 30% tax credit for PV system installation. In contrast, the solar PTC can be claimed every year over the 10-year credit period at the current rate of 2.6 cents/kWh for commercial projects (adjusted for inflation). The size of the system must be under 1 megawatt (MW) to claim an ITC or PTC, and project owners cannot claim both credits for the same property. Projects may qualify for additional bonus credits of 10% if located in a low-income area.
When people think of Delaware … let’s face it, people don’t think of Delaware. But it is the business world’s best-kept secret. About 65% of Fortune 500 companies are incorporated in Delaware (e.g., Amazon, Google, Tesla, etc.). This is no mere fluke. The state boasts a business-friendly climate and extensive body of corporate law. And here’s the kicker: no corporate income tax. Setting up a company in Delaware is so streamlined, that it is home to more than 1.8 million companies—more than the number of Delaware residents! Which is surprising, considering the state has no sales tax, investment income taxes, inheritance taxes, or personal property taxes. A nondescript office building that spans less than a city block in Wilmington, Delaware, is the official incorporation address of more than 285,000 global companies! Notably, you do not have to live in Delaware to incorporate a company in Delaware. Also, a Delaware physical address is not required as long as you retain a Delaware registered agent for your Delaware corporation or LLC.
The predictability of the Delaware court system is a boon for companies—business issues are predictable because of the Delaware Court of Chancery. This forum is the nation’s preeminent corporate court. It is responsible for developing the case law on corporate matters because its judges are experts in corporate law (no juries in this court!). The Court of Chancery handles matters in equity, and focuses on corporate issues, trusts, estates, other fiduciary matters, disputes involving the purchase of land and questions of title to real estate, as well as commercial and contractual matters. The average civil lawsuit can span several years, but with judges who specialize in corporate law and the lack of juries, along with primacy of corporate-related cases, means that similar cases can be decided 
Delaware is considered a tax haven because of its unparalleled tax savings. If your company is incorporated in Delaware, but you conduct business out of state, there is no state income tax. There is also no inheritance tax on stock held by non-Delaware residents. Additionally, there is no state sales tax on intangible personal property (like royalty payments). Also, non-residents who own shares of stock in Delaware corporations are not subject to Delaware taxes. Some companies, however, avoid their in-state income tax by establishing subsidiary or shell companies that hold various intangible assets but do not directly run business operations.
Did you know that you can conduct same-day business filings in Delaware? The incorporation process can take less than an hour! You can find filing forms and fees 
Size matters. Small businesses do not get significant tax savings—you do not get to avoid taxes outright. Delaware does not tax companies incorporated in the state that do not do business there, but you are still responsible for taxes imposed by your home state. Your company will also have to pay the Delaware franchise tax on its shares’ value, but this could be minimal compared to the income taxes your home state may charge. Albeit minimal for small businesses, franchise taxes are subject to increases based on the number of shares and improved value. You may also need to pay a franchise tax in your home state. If you plan on conducting business in another state, you still need to satisfy your state’s filing and licensing requirements for conducting business there (Delaware registered agent 
In sum, the key advantages to incorporating in Delaware are tax benefits, privacy, expediency, simplified structure, and predictability in corporate law. Delaware offers convenience to companies who incorporate within the state, but said benefits are primarily geared towards large corporations. If you have a small business, you should carefully weigh the additional costs involved against the benefits of incorporating in Delaware. But if you structure your company properly, you will reap the privileges of being a Delaware corporation.
Let’s talk about naming your business. As you would expect, branding can make or break a project. 82% of investors say name recognition is an important factor guiding them in their investment decisions, and brands with poor company branding pay 10% higher salaries. A name is a long-term commitment, and can be a daunting task – it took Warby Parker six months and over 2,000 options to find their brand’s perfect name.
Once you get a short list of names together, you will want to determine whether or not any of the names are taken. You don’t have to trademark your business name to run business activity under it, but you do need to register a business if you start any sort of commercial activity, like promoting goods or services. If that’s the case, your business needs to be registered and you’ll need to receive a Tax ID before you can legally operate business activity.
The U.S. Patent and Trademark Office (USPTO)’s Trademark Electronic Search System is the best way to search for all applied-for and registered trademarks. If the name is available, filing a trademark for a business name with the USPTO costs between $50 and $600, depending on if you’re registering the trademark in one state, multiple states, and the type of trademark being registered. Note that if you’re a foreign-domiciled applicant, you are required to hire a U.S.-licensed attorney to represent you at the USPTO.
Now that you know some of the basic rules around naming your brand, it’s time to get brainstorming! The links below are some great examples of online tools that can help you to come up with the perfect brand name, domain name, and URL. Just remember – your brand name should be memorable, accessible, and evolvable.
Should nonprofit organizations expect to attract law student interns by offering only unpaid positions? During law school, students are strongly encouraged to take a series of internships during summers and their second and third years of law school. There are many paid internships, especially for upper-grade level positions. In the non-profit sector, however, paid internships are hard to obtain and when obtained they still pay well below comparable work at firms. 
Non-profits are philanthropic organizations that usually work on a small budget. They generally receive their funding from grants, individual donations, or other fundraising sources. The funding they receive is primarily to be used for benefiting the purposes of their mission. This means that while nonprofits may want to pay interns, they risk not having enough funds for their permanent employees or to allocate to the services they provide. According to the IRS, tax-exempt nonprofits are required to pay “reasonable” salaries to their employees. So nonprofits that can pay interns, run into the problem of trying to offer competitive rates. Under the constraints of the reasonable pay standard of the IRS, how reasonable is it for nonprofits to try to compete with for-profit firms that can offer much higher pay than the general stipend usually offered? These stipends are typically calculated by living expenses for the duration of the internship, and are often only offered after the student has sought out and been unable to obtain funding from other sources.
Complaints against other employees or management in the company will arise. Having a plan for early resolution can prevent these issues from escalating.
One of the principal inter-related aims of antitrust law is the prevention of the collectivization and concentration of market power and the protection of consumer welfare. A brief and highly simplified review of basic economic theory may be helpful here. Market structures exist along a continuum. A monopoly structure-single seller-occupies one extreme pole while perfectly competitive market-many sellers- occupies the other. Ideally, with limited exceptions, the perfectly competitive market structure is preferred because prices are at equilibrium; the price that buyers and sellers are willing and able to trade absent any market impediments. The equilibrium price implies that if a seller attempted to set a price above this level, they would lose sales and revenue, thus becoming unprofitable. A seller in this market is a price taker. In contrast, the monopolist has market power or the ability to influence prices and set a price significantly above the competitive equilibrium thus increasing their profits. This has the deleterious effect of reducing output and creating a deadweight loss. A deadweight loss is a loss in potential economic activity as a segment of buyers can no longer participate in the market.
Although market power alone does not constitute a violation, it’s a significant factor in conjunction with other actions. Other potentially illegal actions include but are not limited to predatory pricing/bidding, boycotts/refusals to deal, vertical integration-price squeezing, vertical restraints-price ceiling/floor, tying-exclusive dealing-bundled discounts. The scope of anti-trust law in regulating business conduct is broad. Anti-trust law is not exclusively limited to the mergers & acquisitions of fortune 500 companies trading shares on wall street. It can have important implications for a small business operating on main street. In fact, several significant landmark cases involved businesses operating at a regional or local level (Aspen Skiing Co. v. Aspen Highlands Skiing Corp (1985)). It’s important to remember that operating one’s establishment in a way that’s unfair to competitors or consumers is a potentially losing strategy. It’s recommended that business owners have some familiarity with anti-trust legal principles especially as their business continues to grow. A good first step is to review the FTC’s Guide to Anti-trust Laws which can be accessed through the link below.
Small businesses hit hard by the pandemic relied on government stimulus to stay alive. Many small businesses are considering their next move now that crucial stimulus is running out. For a small business with overdue debt, its creditors are likely calling, asking when they will be paid or, worse, making threats about collections and repossessions. As a result, small business owners may ask themselves what they can do to move forward.
Zach Javorsky is a recent graduate of Penn State Dickinson Law. He is from Pittsburgh, Pennsylvania, and is a graduate of Allegheny College. Zach plans to become a corporate attorney after graduation. He is a member of the Dickinson Law Review Editorial Board.
Lance Sacknoff, at the time of this post, is a graduating 3L at Pennsylvania State University – Dickinson Law, earning a J.D. and certificate in Entrepreneurship Law: Intellectual Property and Technology, as well as CALI awards in Blockchain & Cryptocurrency Law and Internet Law. As a law clerk for a Carlisle firm, Allied Attorneys of Central Pennsylvania, Mr. Sacknoff currently pursues his passion in helping small business owners navigate a variety of legal issues. He also recently served as a Launchbox panelist on “Demystifying Trademarks: What Small Business Owners Need to Know.”