Legal Tips for Small Businesses in a Slowing Economy

Legal Tips for Small Businesses in a Slowing Economy

Economic indicators I follow mostly point to a slowing economy, both nationally and here in Bend, Oregon. (Note: I’m not an economist and can’t possibly say with any certainty what state the economy is currently in, let alone what it’s going to be like in the future.) Whether or to what degree the economy is slowing, it will sometime because it always does. It’s worth considering a few steps to make sure our small businesses are in the best shape possible when a downturn does arrive.

I was practicing business law in Bend during the Great Recession, which hit Bend as hard as almost anywhere. It was tough, both for my business and for the businesses of my clients. A slowdown (or an outright recession) means one primary thing: for a lot of people in a lot of industries there is less money flying around and people and businesses in a marginal position can suffer and, in the case of businesses, go out of business. The following is a list of things to think about implementing to protect your small business from the worst of whatever might be coming:

  1. If you have employees, get a quote from your insurance agent on an employment practices rider on your business insurance policy. Slowdowns often result in layoffs, and any employment termination, even if properly handled by the empoyer, carries the risk of a disgruntled former employee filing a wrongful termination claim, whether justified or not. Employment practices insurance pays, up to a limit, your attorney fees and damages or settlement assessed as a result of many types of employment claims. Often the coverage is quite reasonable, and other than (hopefully obviously) not engaging in anything like unlawful employment conduct, it’s the best protection you can get against a costly employment claim.
  2. If someone owes you money, get it as soon as you can. When we were headed into the recession in around 2007, a real estate investor client asked if he could pay his $8,000 bill to my firm with a credit card. I told him, no, we don’t take credit cards, just pay us with a check. The client filed bankruptcy a while later, and I never did get paid. My firm accepts credit cards now. I don’t know if credit cards are the right thing for your business, but the point is it is likely to get harder to collect from people soon, if it hasn’t already. If you have an opportunity to get payment – even partial payment if from a shaky client – take that now because it might not be there soon.
  3. Sort out ownership/control issues now if you can. Many small businesses have latent ownership or control disputes that have been papered over by the good times. When there’s lots of money, people in business together tend to get along pretty well. When things get tough, and there’s less money to go around, those latent disputes come to the surface, at the worst possible time, because there’s less money to buy out a partner or even hire an attorney to fix things. Think about whether there are any uncertainties in the ownership or control structure of your business now, before things (maybe) get bad.

Everyone’s business is different, but the items above apply throughout most small businesses, and at least merit a bit of thought. Hopefully the economy continues to grow and we don’t have to worry about a sustained slowdown, but a prudent business person doesn’t only plan for the best case scenario.

Jeff Eager is a business attorney at EagerLaw PC, in Bend, Oregon. He can be reached at (541)323-5850 or

Jeff started EagerLaw PC to help Oregon entrepreneurs succeed in business. Jeff worked in Washington, D.C. for Oregon Congressman Greg Walden, served as Mayor of the City of Bend, and has been practicing law in Oregon for over a decade. Jeff believes strongly in entrepreneurship and enjoys making the legal side of business transparent and easy for his clients.


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