A small business is a business which is owned and operated privately. Small businesses maintain a relatively low volume of sales and a small number of employees.

The standards for small businesses in the United States vary by state and by the industry in which the business operates. Because of their ease of operation and the tax deductions which are commonly available, small businesses are becoming more popular.

In general, small businesses are businesses which have less than 500 employees for a business in a manufacturing industry and less than $7 million an annual income for businesses in non-manufacturing industries. A small business usually takes the form of a:

  • Corporation;
  • Partnership; or
  • A sole proprietorship.

What Are Some Common Small Business Conflicts?

A small business can experience conflicts and legal disputes. Just because a business is smaller in size does not mean that a business will be free of conflict.

In addition, certain specific legal conflicts may arise because of the size of the small business and the specificity of their operations. Examples of common types of disputes which may arise with a small business includes:

  • Hiring and termination disputes;
  • Disputes over business property and assets;
  • Zoning, land use, and property use conflicts;
  • Disputes over loans and financing; and
  • Conflicts regarding the company’s structure or formation.

Numerous small business conflicts involve personal disputes, especially when the business is a smaller, family-run business. Common examples of conflicts with small business management may include:

  • Conflicts with employees;
  • Labor union conflicts;
  • Issues with white collar crime, for example, tax evasion or fraud;
  • Disputes with other businesses, including trade secrets issues, unfair competition, etc.;
  • Handling employee benefits and wages; and
  • Compliance with federal and state laws, such as Americans with Disabilities Act (ADA) and handicap accessibility laws.

Have You Been the Victim of Small Business Fraud?

A small business may face numerous unique challenges that large corporations and organizations typically do now. These challenges may include the risk of being victimized by small business fraud.

For a small business, experiencing fraud may have significant and long-lasting consequences. However, there are ways a small business can reduce the risk of fraud, protect their company, and pursue any individuals who are responsible for defrauding the small business.

What is Small Business Fraud?

Small business fraud is often perpetrated by an individual within the business with the intent of gaining an unfair financial advantage. In many cases, the fraud is conducted under the guise of a legitimate business practice.

Small business fraud may also involve materially misleading conduct. Common examples of small business fraud where the perpetrator is an employee of the small business and defrauds the small business itself include payroll fraud and cash theft.

Payroll fraud may include activities such as having a co-worker clock in for an employee who did not yet arrive for work or to clock in for an employee long after that employee has actually left the office. Payroll fraud may also include other more deceitful actions such as payroll staff altering the employee records either to create an employee that does not exist or to extend the pay of an employee who no longer works for the business.

In these types of cases, the payroll staff will then redirect the pay for those employees back to themselves. In addition, there are numerous other examples of ways in which payroll may be abused or altered in order to defraud small businesses.

Becoming educated regarding these types of activities may help a small business owner from falling victim to these types of schemes. Another example of small business fraud which is committed by an employee of the company is cash theft.

Cash theft is what the title describes, the theft of cash. It can, however, be committed in different ways.

Some small businesses rely on cash transactions more than other businesses. Certain types of small businesses, such as coffee shops, food trucks, or hair salons, typically have more cash in their stores than other types of businesses might.

If a small business does not implement a quality cash monitoring system, employees may be able to steal cash unnoticed which has not yet been reported. In some cases, employees take cash outright which has been reported.

There are also different types of schemes which may be perpetrated by individuals outside of the small business in an attempt to take advantage of small businesses. One common example is false invoicing.

False invoicing occurs when an individual hires a contractor or business person to complete a job and they receive an invoice with charges they do not recognize. False invoicing is this concept, where vendors which work with the small business charge the business for bogus expenses.

What Are the Consequences of Small Business Fraud to a Business?

Fraud on a small business is typically much more harmful to the business than fraud which is conducted on other organizations. This is because the proportion of loss a small business incurred compared to their revenue and number of personnel may be very costly, if not deadly, to the small business.

All types of businesses feel the impact of fraud. If, however, a small business loses key personnel to fraud or if it loses a significant share of revenue or assets, it is much more difficult for the small business to recover.

This is why it is so important for a small business to be vigilant and very aware of the signs of small business fraud. This will help the small business mitigate the risk of fraud to that small business.

How Do You Protect Your Business From Fraud?

The first step an individual can take in protecting their small business from fraud is to mitigate the risk of fraud. A small business owner is usually incredibly busy.

However, a little bit of work up front may prevent a lot of issues in the future. For example, it is important to monitor issues such as payroll, put in a cash monitoring system to ensure cash is not disappearing, and always check other invoices, even those from trusted vendors, to ensure that the small business is not a victim of fraud.

Small actions along with a system of checks and balances, such as the owner opening bank statements themselves, tasking a department other than the accounting department with opening the mail, as well as having an individual other than the one who is responsible for billing make any deposits, can also help to curb fraud.

What Remedies Are Available for Victims of Small Business Fraud?

Unfortunately small business owners can do everything right and still be a victim of small business fraud. Technology is more sophisticated than it has ever been.

As hard as a small business owner works, it is very challenging for them to have their hand in every aspect of their business at all times. If an individual has been the victim of small business fraud, they may be able to file criminal charges, such as larceny for cash that was stolen, or civil charges, which may lead to a damages award to make up for losses which resulted from the fraud.

Do You Need An Attorney if Your Business Has Experienced Fraud?

It is essential to have the assistance of a fraud attorney if you suspect that your small business may have been the victim of fraud. Your attorney can assist you with navigating your case and ensure that your interests are protected.

It is important to contact your attorney as soon as you notice any fraudulent activity. Your attorney can advise you regarding the laws in your area and represent you if you are required to appear in court.