Running a small business is a dream come true for all entrepreneurs. Unfortunately, simple issues and legalities can turn your dream into a nightmare. Even if you don’t want to get sued, 36% to 56% of small businesses often end up involved in some form of litigation every year. Similarly, 90% of small businesses get sued at least once while operational.
Lawsuits and the resulting liabilities cost your business time, money, and reputation. They are also stressful to business owners and can put your business out of the market. While you can’t completely avoid lawsuits, you should consider the following to mitigate these legal issues:
1. Hire a Competent Attorney
Most budding entrepreneurs make the mistake of not seeking legal help when starting their business. You should interview lawyers and have legal counsel always on standby instead of looking for a lawyer to solve already complicated legal problems. As such, hire a reputable attorney who is well-versed in legal issues specific to the type and size of your business.
Your attorney of choice should be familiar with local laws and regulations. Your attorney from Blake Harris Law will help you avoid tax issues, licensing, overtime, and termination disputes, trademarks, and liabilities. The lawyer will also suggest the best way to separate personal finances from the business to avoid personal liabilities.
2. Maintain Written Records and Agreements
Most entrepreneurs overlook the importance of keeping all documentation and business agreements. Accurate and proper records management can make a difference when facing a lawsuit. While some blatantly ignore it, most business owners frankly don’t know what records to keep and tips for storing them.
Your attorney should help you file formal contracts, such as employment contracts, supplier agreements, and records of general sales. You should also have details of all business transactions. Employee records, such as payroll documentation, personnel records, FMLA details, work compensation statements, and employment agreements and contracts, should also be kept safe.
3. Know your Insurance Coverage Needs
Avoiding business lawsuits and the resulting implications can prove impossible, especially if your business is in a high-risk niche. Fortunately, insurance can help reduce the financial impact of lawsuits on your business. You should consider the following insurance policies for your business:
* General liability insurance: Covers various small business risks, including claims resulting from bodily injuries, property damage, and copyright infringement.
* Commercial auto insurance: Protects your business and employees from liability resulting from auto accidents. It also covers the cost of damage sustained by your business vehicles.
* Professional liability insurance: A perfect option for businesses offering professional services to their clients. Covers for damages resulting from error or omission during the provision of services.
* Umbrella insurance: Protects your business from liabilities outside the coverage limit of standard insurance policies.
You should notify your insurance provider immediately when a claim is made against your business. Early reporting helps avoid lengthy legal battles.
Endnote
Entrepreneurs are responsible for protecting their business and personal assets from lawsuits and associated liabilities. Regardless of the reason, you should first contact your attorney and insurance provider immediately after your business is sued. You shouldn’t ignore, respond, or represent yourself.
