If you own a business you have to be proactive in protecting yourself against lawsuits.
Every year, somewhere in the range of 36-53% of small businesses undergo litigation. The best you can do is take steps to lessen the chances of being sued and to be prepared for it in case you are.
Use these 5 tips for protecting your business from future lawsuits.
1. Know the Law and Act with Caution
Of course, you’re not expected to have a law degree. That’s why you hire an attorney. But you will have to understand enough to be sure that you do not violate the law, putting your business at risk.
The most common lawsuits filed against businesses are:
- Employee and third party injury cases
- Defective products
- Breach of contract
- Wrongful termination
It’s important that you make every attempt to act appropriately and avoid taking risks. You should expect the same of any employee as well.
2. Be Sufficiently Insured for Future Lawsuits
All businesses should have liability insurance. This is what will protect you from the two most common causes of lawsuits brought against businesses.
There are various types of liability insurance that are more well suited to different businesses. For instance, manufacturers and service businesses will need different coverage.
Even when you have been found not at fault in a case, the legal charges you incur can be significant. If you are properly insured, you won’t be stuck paying your legal fees out of pocket.
You’ll probably want to speak with counsel to be sure that you are appropriately insured.
3. Separate your Personal and Business Holdings
The most common business classification for small businesses is sole proprietorship. For most business owners this is the easiest way to start their business.
In the case of a sole proprietorship, it may be possible for the plaintiff to attack the personal assets of the business owner along with their business assets.
One way to avoid this is to create a trust that holds the company’s assets. Or the company could be incorporated, if possible.
4. Have a Capable Attorney
Your lawyer can help you to understand the law as it pertains to your business, establish the appropriate legal classification for your business, and insure your business sufficiently.
Additionally, you should consult your attorney before responding to any legal action or anything that may lead to future lawsuits taken against you.
5. Secure Your Files and Data
Nearly every business operating today has a great deal of sensitive data stored on computers and online. Keeping this information secure is vital to protect your business legally.
If you were to lose files due to damage or stolen data, you may fail to perform certain contractual obligations. Or if the data belongs to a client or supplier, they may take legal action to seek reparations.
To avoid this you should be sure you have virus protection on all your computers. Additionally, you should backup your files.
When backing up files on the cloud, choose a service that will encrypt uploaded information for further protection.
Protect Your Business and Do More
Use these 5 tips for protecting your business from future lawsuits, but don’t stop there. Get more business advice to keep improving productivity, efficiency, and profitability.