5 Ways to Protect Your Business From Lawsuits
August 23, 2022
Did you know that there are 12 million contract lawsuits filed against small businesses each year? Not only is this true, but the average suit costs $54,000, according to The Zebra’s 2021 Small Business Statistics Report. For many small businesses, this can be crippling. Here are five tips to protect you and your business.
Work With an Experienced Attorney From the Start
When you start a company, it’s important to consult an attorney at the beginning. An experienced attorney will be able to help you navigate the complicated legal landscape businesses face today. You’ll want to look for someone that has experience in your industry and who can help you stay in compliance with local, state, and federal laws. A good way to limit costs is to work with a lawyer on a consulting basis. You do the legwork and they review to provide the expertise.
Make Sure All Agreements are in Writing
Consulting with an attorney about your business may be most important, but a close second is making sure all business agreements are in writing and that you keep accurate records. Having signed agreements can be a life-saver for your business, especially during uncertain times. Not only will this help protect you in case of a lawsuit, but it’ll also protect you in case you’re the one needing to do the suing. Business arrangements fail all the time, and it’s best to protect yourself.
Maintain a Good Reputation & Business Practices
Not only will a good reputation help your business’s sales, but it helps maintain a good foundation for your business. Bending the rules or misrepresenting your offerings and capabilities, will always come back to bite you, and it will open you up to possible litigation.
Be Aware of Your Insurance Needs
A great way to reduce the impact of a lawsuit is with proper insurance coverages. For example, a General Liability Insurance policy can help protect your business from many risks like claims related to bodily injury, property damage, advertising injury, and more. Also, if your business offers professional advice and expertise to clients, Professional Liability Insurance is a must. Professional Liability Insurance will cover the costs to defend your business in case of a lawsuit resulting from an error or omission.
Separate Business and Personal Finances
Last but not least, always separate your business and personal expenses. While it may be common for small businesses that operate as sole proprietors to use their personal bank accounts for expenses, this opens you and your business up to substantial risk. In the event of a lawsuit, you would be personally liable if you haven’t structured your business as an LLC or corporation and you haven’t kept your assets separate.
While lawsuits are a part of most businesses’ lives, you can be prepared by following some of the tips above. If you have questions about insurance policies or comprehensive risk management strategies, please reach out to us via our contact form.