(This column originally appeared in Entrepreneur)
Opinions expressed by Entrepreneur contributors are their own.
Earlier this month, Baldwin was charged with involuntary manslaughter in Arizona, the state where the incident occurred, and faces up to 18 months in prison if found guilty. This is an awful situation. But it’s also a reminder of the liabilities we all face as business owners. Because, as a producer of the film, Baldwin was a part owner of the enterprise. And with that great opportunity for profit also comes great responsibility.
By now you’re familiar with the ongoing saga of Alec Baldwin and the tragic shooting accident of a cinematographer on the set of his film “Rust.” Earlier this month, Baldwin was charged with involuntary manslaughter in Arizona, the state where the incident occurred, and faces up to 18 months in prison if found guilty. This is an awful situation. But it’s also a reminder of the liabilities we all face as business owners. Because, as a producer of the film, Baldwin was a part owner of the enterprise. And with that great opportunity for profit also comes great responsibility.
And these responsibilities extend to all areas of our businesses.
For example, as a certified public accountant, I’ve signed tax returns for clients in the past. And, even though I do have both professional and legal requirements I must fulfill, in the end, a company’s tax return is the responsibility of the company’s owners. If, like most small businesses, your business is owned by yourself or maybe with a partner or two any problem, error or issue with your tax return is ultimately on you. Even if you were unaware of an omission (or a commission) you’re still responsible for it. You can’t just blame everything on your accountant. Your signature is on that return. You own it and you’re liable — both civilly and even criminally — if there’s a significant error. So read your return. Ask questions. Know what you’re signing before you sign it.
The same goes for mistakes made by your employees while on the job. If an unsuspecting bookkeeper accidentally runs over a puppy on the way to make a bank deposit or pick up a package during company hours then this is going to be your problem. If a service technician makes an inappropriate comment to a customer out in the field you’re going to hear about it. If your delivery driver sideswipes a parked car that obligation is yours. If someone slips on your walkway, that’s going to be your responsibility too. This is why insurance exists. And the claims aren’t getting any smaller in this ever-growing litigious environment. So meet with your insurance advisor regularly and make sure your coverages are appropriate.
Unfortunately, being associated with an unpopular influencer, a controversial event or a marketing campaign that goes south is also your fault. Pepsi didn’t expect the backlash it received when the company launched a campaign featuring Kendall Jenner, who offered its product to a police officer at a protest as a peace offering. Adidas came under fire when congratulating customers who ran in 2017’s Boston Marathon with the slogan, “Congrats, you survived the Boston Marathon.” Other brands have been accused of racism, colonialism and other transgressions as a result of their misguided marketing campaigns.
But it’s not just the big brands — and their shareholders — who suffer the consequences of their actions. There are plenty of small businesses that make these mistakes. And for us, because of our size, the repercussions are more severe.
A Dallas restaurant chain caused controversy when it implemented a surcharge for employee benefits. The owner of an Italian restaurant “ sparked outrage” after a Facebook post. Another business owner was slammed on social media for trying to scare off a homeless person with a hose. There are countless other stories of small businesses that suffered the wrath of Twitter and Facebook for their actions or the actions of their employees — this includes taking a position on a controversial social issue and losing customers as a result or even being forced to shut down because of it.
And there are countless other stories of business owners who, by trusting too much, had funds stolen by office managers, accountants, employees, financial executives and bookkeepers. Maybe they had insurance. Maybe they didn’t. But no insurance is going to cover the lost time and the anguish of such a loss, let alone the public humiliation of having to admit to the world that by your lack of internal controls you’ve been had. And then there is the countless number of small businesses — most of them unreported — that have suffered significant losses of data and face enormous lawsuits from angry customers thanks to their poor network security that resulted in breaches and ransomware attacks. You need insurance for all of this too.
But the answer isn’t just insurance. It’s internal controls. It’s management participation. It’s care and attention to detail and scrutiny and involvement and all the other things that a business owner must do in order to minimize their potential exposure to liability. Alec Baldwin, unfortunately, didn’t check that the gun he was using in a make-believe scene contained make-believe bullets. Maybe that was an honest oversight. Maybe he should have been more diligent. Regardless, he’s the owner of the movie-making production so he’s on the hook.
As business owners we take risks. Substantial risks. It’s what separates us from employees. An employee can walk away from a job anytime and just get another job. But the owner of a business can’t do that. We must meet obligations and are exposed to both financial and legal repercussions for the decisions we make. Let’s never forget that.