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Tips to Protect Your Business from a Lawsuit

— November 19, 2020

When trying to protect your business, properly drafting workplace procedures and policies can help prevent lawsuits.

Running a business is both fun and challenging. It can also be quite profitable. But, as a business owner, there is always the possibility you will be sued. If this happens, handling a lawsuit can be expensive, time-consuming, and emotionally draining for everyone who is involved. As a small business owner, any accusations that are associated with a pending lawsuit may also cause damage to the reputation of your business.

The occurrence of civil lawsuits against businesses has gone up more than 400% in the past 20 years. It is essential for you to protect yourself and your business from high expenses and devastating outcomes that result from the court ruling in favor of the plaintiff. While this is true, there are some steps you can take to avoid being sued and to help protect your business.

Remember, if you are ever facing legal challenges hiring an attorney and using the services of court reporters Sacramento to help you get through the situation can be helpful.

Consider Incorporating Your Business

One of the best things to do when it comes to protecting your business from a lawsuit is to avoid it. Unfortunately, some situations cannot be prevented. One example of this is if an employee is injured while working. If this happens, they should sue you and you may be required to pay their lost wages. If your employee’s lawsuit is successful, the financial settlement may be collected by way of your bank accounts, home, and any other assets you own.

If you incorporate your business, you are separating your personal assets and business assets. This requires the opposing side to only sue for the assets that are associated with your business.

Protect Your Business with the Proper Insurance Coverage 

Purchasing insurance for your business will not prevent you from being sued. While this is true, it will help to separate your business and personal financial situation from the monetary issues related to the lawsuit. The insurance company will help cover liability costs and legal fees.

You need to research the different policies available before deciding what you need. Usually, small business owners choose general liability insurance that will protect if an employee files a lawsuit after being injured at work. There are other business owners who choose to purchase errors and omissions insurance, which protects against lawsuits filed by clients because of a mistake that occurs during a work-related project. Talk to a business insurance broker to figure out what type of policy best suits the needs of your business.

Create Legal Contracts as Needed

All businesses, regardless of size or niche, need to use legal contracts, created by an attorney when dealing with another business or person. This is a rule that pertains to every business. A properly drafted contract will help protect your interests if a lawsuit is filed.

A man and a woman reviewing a contract at a desk; image by Rawpixel, via
A man and a woman reviewing a contract at a desk; image by Rawpixel, via

You need to define the services offered to customers to reduce the possibility of legal disputes. Proper legal documentation shows what is expected from all parties and put in writing, in a binding agreement.

Maintain Accurate Records

Any reputable business will ensure accurate records are always maintained. The process includes recording the date and time of when agreements are signed, and the items discussed at the meetings. All communication, including transactions, emails, and phone calls can and should be documented. There are some businesses that limit record-keeping to when an issue occurs, which can cause issues down the road.

You should make sure all records are concise and clear and that they include all pertinent information. These details include different services and products discussed during the negotiation process. Remember, having accurate and consistent records can serve as a defense if a lawsuit is filed.

Create and Use Company Procedures and Policies

When trying to protect your business, properly drafting workplace procedures and policies can help prevent lawsuits. Be sure you let your staff know that it is imperative they follow these written policies since they are vital when it comes to protecting your company. Providing your workers an employee handbook or job manual is one of the best ways to ensure everyone is on the same page when it comes to what to do and what to avoid.

Be Moral, Honest, and Ethical

Your business needs to take steps to remain ethical in practices followed each day, which will help build a good reputation in the community. Your ultimate goal should be to ensure that no transaction, dollar amount, or client is worth jeopardizing their place in the market by bending the rules.

As you can see, there are more than a few ways you can protect your business. Take the time to keep the information here in mind to ensure that you are taking the right steps to keep your business safe and protected from the possibility of a lawsuit. Being informed is your best defense in these situations.

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