ABSTRACT:- This study examined the legal risks associated with informal business agreements among sole proprietorships in Aurora Province. Specifically, it described the respondents’ demographic and business profiles, assessed their reliance on informal business agreements, legal awareness, legal risk exposure, and institutional support, and examined the relationship among these variables. A quantitative descriptive-correlational research design was employed involving 378 sole proprietorships selected through proportionate stratified and systematic random sampling. Data were gathered using a validated researcher-developed questionnaire and analyzed using descriptive statistics, Pearson’s Product-Moment Correlation, and Hayes’ PROCESS Macro for mediation and moderation analyses at the 0.05 level of significance. The findings revealed that respondents frequently relied on informal business agreements, particularly trust-based arrangements and digital communications, while demonstrating only moderate legal awareness and institutional support. Legal risk exposure was experienced at a moderate level, primarily through contractual misunderstandings, delayed payments, financial losses, and difficulties in enforcing agreements. A weak but significant positive relationship existed between reliance on informal business agreements and legal risk exposure. However, legal awareness did not significantly mediate, and institutional support did not significantly moderate, this relationship. Based on these findings, a Legal Risk Management Framework was developed to promote safer, legally compliant, and sustainable business transactions through risk identification, contract documentation, evidence preservation, legal awareness, institutional engagement, and continuous improvement. The study contributed empirical evidence supporting proactive legal risk management among sole proprietorships in the digital age.

Keywords: informal business agreements, legal risk exposure, legal awareness, institutional support, sole proprietorships