5 Steps to Protect a Small Business from a Lawsuit


As a small business owner, it is your responsibility to accomplish tasks and make crucial decisions to maintain the smooth flow of the business. But it is also necessary to know how to reduce the risk of litigation to guarantee the continuity of business.

So here are five steps you should take into consideration to secure your business for the future.

Be aware of what you do and speak

Business owners and their employees, should refrain from making any public statements or going on any activity that could be deemed controversial. It means preventing libelous or even slanderous comments, bullying, harassment and other inappropriate behaviors. Business owners should avoid legal issues by following all local, state and federal labor laws. In general, avoid circumstances that may destroy your reputation as a business owner that could also land you in serious legal trouble.

Consult a corporate lawyer

Business owners need to recruit corporate lawyers to have a legal connection on hand, especially if they are starting a business. You will want an attorney to instruct you on how to respond if you have been sued. Business owners should seek help from competent lawyers such as The Knowles Group who know the local and state laws in the area where the business is located.

There are a number of things that will help you find a good lawyer. These include interviewing and cold calling, qualifying referrals from other business owners or through the organizations to which the business belongs.

Isolate yourself from your business

May business owners own and operate their enterprises as a sole proprietorship. The only drawback with this is that the owner’s private properties like vehicles or houses are relatively easy to target or attach to a legal suit.

The solution for this is to obtain a trust for the ownership of the business. A trust is considered a legal entity that assists business owners in the filing of the business’ tax return. A trust may include properties, businesses, funds, shares, and various assets. If a fully established trust owns a small business and someone has filed a lawsuit against the business, the only assets that can usually be targeted are those that are within the trust.

Acquire liability insurance

All types of businesses should acquire liability insurance and minimize any potential conflicts of interest. Many professional insurance agents will also recommend accepting mistakes and covering inconsistencies to guarantee that the business will be covered. This should be taken into consideration should a client or consumer suspect the owner of making a wrong decision or not being able to fulfill the deal.

Aside from purchasing insurance, incorporating protection in terms of your contracts is another way to insure yourself from liabilities. Trying to discuss the potential provisions and legal terms included in your employment contracts is one of the best approaches to using your lawyer’s resources. It will also minimize the need for a lawyer at the early stages of your business venture.

Keep your business files protected

Many businesses are operating on machines very extensively these days. Thus, it makes sense to highlight the safety standards for your database. Businesses should install an updated antivirus and other security software onto their computer systems.

You must have a collection of backup files to return to in case of a major technological failure. This could involve doing backups monthly, weekly or daily and keeping the customers informed of whom you are hiring. Having backup files off-site may also aid in ensuring continuous protection for your business. When you have such files in your workplace, you will need to buy a fireproof safe for your files to be organized and stored properly.

If there is a lawsuit, business owners have the duty of defending their companies as well as their own assets. Through these five steps, your small business will have a good future that is as free of conflicts as possible.