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Can the law protect your business from economic recessions?

On Behalf of | Nov 9, 2023 | Business |

An economic recession can impact individuals and businesses alike. People may start reducing their spending, and that can worsen the impacts already experienced by previously profitable organizations. Sometimes, businesses have to make difficult decisions. They may need to close some of their locations or lay off some of their employees. Sometimes, companies end up closing during a recession because they don’t have plans in place to weather a temporary economic downturn.

Thankfully, business owners and executives can help protect their investment in a company by planning for the possibility of an economic downturn while the company is still healthy. And, there are several legal ways of helping protect a business from the harm caused when a recession does occur.

Bankruptcy and insurance laws offer options

There are multiple statutes that can help businesses struggling during a recession. For example, there are bad faith insurance laws that help ensure that a company can make use of certain types of insurance coverage if the circumstances meet the terms included in a policy. Business interruption insurance or special coverage to help a business cover its financial obligations could play a crucial role in helping an organization survive an unexpected recession.

Sometimes, what businesses need to do is to rework their operations and eliminate certain debts. There are multiple different types of business bankruptcy available. Business bankruptcy can help companies eliminate certain financial obligations and rework others to help the company survive during a time of financial hardship. At-will employment laws can also benefit companies if they must downsize during a recession, as they can let go of some of their workers without facing litigation that might destroy the company’s operational budget.

Congress often acts during recessions

During times of financial hardship, lawmakers at both the state and federal levels sometimes enact short-term programs or new laws that can help businesses, particularly employers, address financial challenges. During prior scenarios involving protracted economic challenges, Congress has instituted programs that provided both loans and grants to businesses to help them pay operating expenses and keep as many workers as possible employed.

Obtaining thoughtful legal guidance when seeking to overcome short-term economic challenges, like a recession can help executives and business owners make use of the laws and programs designed to keep companies solvent.