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5 Tips for Protecting Your Business Against Litigation

— June 8, 2022

No matter what you do to protect yourself, there is always going to be a risk that litigation will occur.

When you run a business, you must be capable of managing and mitigating risk. This includes protecting your business from legal issues, such as litigation. Here are five tips for protecting your business against litigation.

1. Invest in Business Insurance Coverage

One of the best things you can do to protect your business against litigation is to invest in good insurance coverage. There are a few different types of business insurance you may need, including general liability insurance, commercial automobile insurance and professional liability insurance. You should also consider cybersecurity insurance. Because you need two or more types of insurance, many providers offer bundling options, such as Business Owners Policies and commercial umbrella insurance. Investing in an insurance bundle is a good way to ensure comprehensive coverage while also saving money.

2. Have an Attorney on Retainer

No matter what you do to protect yourself, there is always going to be a risk that litigation will occur. To prepare for this possibility, and so you have access to legal assistance for other issues or questions, you should build a relationship with a suitably experienced attorney or law firm. Businesses commonly have lawyers on retainer, which means they pay the lawyer or the firm a regular fee so they can access legal services as needed. Look for an attorney who has experience with businesses of your size and industry.

3. Adequately Protect Your Intellectual Property

Protecting your intellectual property (IP) is imperative to your business’s success. If you don’t protect your IPs, then it’s easier for people and other businesses to steal them and profit from them at your expense. When you get your IPs registered, copyrighted or trademarked, then you have a legal right to have them protected. Ensuring that your IPs are registered as soon as possible also makes it easier to protect them. If you don’t take these preemptive steps, then you may need to dispute the theft after it occurs, which tends to be much more difficult.

4. Always Put Agreements in Writing

Woman signing contract; Photo by Karolina Grabowska from
Woman signing contract; Photo by Karolina Grabowska from

Never trust people to uphold verbal agreements. If you don’t get contracts and other agreements set down in writing, then you should assume it isn’t binding. Each time you begin a business relationship with a person or organization, both of you must settle on your agreement, get it all in writing and sign it. You must also make sure you get the contract witnessed, reviewed by your attorneys and notarized if any of that is necessary. If you follow these steps, then you’ll be able to refer back to the documents in case of any disputes or contractual violations. While verbal contracts are technically subject to the same laws as written ones, they’re also far more difficult to validate, review and dispute.

5. Separate Your Business And Personal Finances

Protecting a business against litigation is particularly vital for small business owners. Small businesses have fewer resources than large corporations, so the effects of lawsuits can be more severe if they occur. One of the ways you can do this as a small business owner is to keep your business and personal finances carefully separate. Mixing your business and personal finances puts you at a much higher risk of litigation due to comingling and actual or perceived conflicts of interest. Avoid using your business funds to pay for any personal expenses. Avoid doing the same with your personal funds.

Remember, prevention is an incredibly important aspect of protecting yourself against litigation, but you also need to be prepared to deal with litigation if and when it occurs. This is where having access to insurance coverage and attorneys comes in.

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