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4 Things That Could Cause a Lawsuit for New Business Owners

— September 15, 2022

You don’t need to spend every second of your waking hours having paranoid fantasies about lawsuits.

As a new business owner, you want to keep a positive and optimistic mindset. On the other hand, you’ve also got to exercise an abundance of caution. There’s a lot that can go wrong in running any type of business, and proprietors often don’t realize the full scope of their risk exposure. Here are a few potential lawsuit worries that business owners need to be aware of.

1. Marketing Missteps

Marketing is essential to a new enterprise’s growth track, but you need to go about it with care. Make sure that all of your materials are completely original. Using another business’ intellectual property could give it a cause of action against you. Avoid infringing on trademarks, using other websites’ exact language, or appropriating images that you don’t have the rights to.

Likewise, you need to be mindful of misrepresentations in your outreach and engagement strategies. Making big promises or product claims that you can’t back up could violate your state’s consumer protection laws. Seemingly simple misstatements or misrepresentations can put businesses in the position of having to pay regulatory fines or comply with an injunctive order. Steer clear of the tech tactics in outreach initiatives that can easily run afoul of state law such as using caller ID spoofing or deploying invasive tracking programs.

2. Hiring and Managing Staff

New business owners typically haven’t hired or managed staff before, so it’s no surprise that this is one area of small business management that can commonly lead to lawsuits. Familiarize yourself with key elements of federal and state employment law. Verify that your employee categorization practices as well as your wage and hour computations are in accordance with applicable guidelines.

In the hiring process, you need to be wary about how you interact with candidates. Learn about the types of questions that you can’t ask during job interviews because they could be considered discriminatory. Treat all of your candidates with the same standards.

3. Professional Licensing

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New businesses may need several different types of credentials to operate. If you’re a speciality service provider, you may need a license that’s backed by a bond. Typically, these types of licenses are requirements in highly regulated professions. Real estate agents and skilled tradespersons, for example, need to obtain a license from their state. To qualify for a license, it may be necessary to undergo certain types of training or pass an examination.

Operating a business in a regulated industry without the right license could put you at risk of a formal injunction, and you could also face statutory fines. It’s also important to bear in mind that a client who has a claim against you based on the work that you’ve performed would probably have an easy time making his or her case if you weren’t properly licensed.

4. Business Licensing 

Apart from a professional license, you may also need a business license. Instead of being issued by a state, this type of license typically comes from a city or municipality. Check your locale’s regulations to find out what you need. If you have a business with a physical location and you open your doors to the general public, you may need to pass an inspection. Inspectors check for key safety criteria such as electrical systems, emergency egress, and ventilation. Skipping this step could result in practically automatic culpability in any type of premises liability claim. Likewise, some cities fine businesses as much as a thousand dollars per day if they continue operating without a valid business license.

You don’t need to spend every second of your waking hours having paranoid fantasies about lawsuits. Anybody who thinks like that should be a lawyer instead of a business owner. Nevertheless, you need to be conscientious about proactively protecting yourself. When you know that you’re taking the right steps to safeguard your business, you can go on about your day-to-day operations with considerable peace of mind and stop worrying about scary liability scenarios. Smart policies, good managerial oversight, and strategic insurance coverage elections will offset your risk exposure considerably.

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