Lawsuits can be devastating to a business and are often the reason for company closure or bankruptcy. Small business owners need to understand their litigation risks. From choosing the right business structure to registering it correctly to keeping up with employee and consumer protection laws to avoiding intellectual property disputes, there are many ways for entrepreneurs to reduce their chances of getting sued.
Company Hire an Attorney
Business litigation is expensive, and a lawsuit can spell disaster for small businesses. It can cost the company money, reputation, and resources, not to mention the stress and time required to fight a frivolous lawsuit. Underhill Law Firm can help prevent lawsuits by reviewing contracts, drafting new ones, and addressing legal issues. In addition, a lawyer can advise the company on zoning ordinances, license requirements, and other regulatory matters that may affect the business.
Employees can also be a major source of litigation. For example, it could face labor lawsuits if the company refuses to hire someone based on race or religion or misclassifies employees as contractors to avoid paying overtime. Choosing the right business structure can also protect against liability. Incorporating it as a corporation or an LLC will separate the owner’s assets from the business assets. They may be covered in the event of a lawsuit.
Keep Records
It’s only sometimes possible to prevent legal action, but it is a good idea for business owners to implement essential best practices. It includes making sure that all agreements with employees, suppliers, customers and other businesses are put in writing. Doing so makes it easier to dispute a deal in the future. Also, it is important to keep meticulous financial records of all business transactions. It will help if you defend yourself against a claim that your business is overcharging clients or has not fulfilled its promises.
It is also a good idea to use a separate bank account for your business and keep all personal information, such as Social Security numbers, to a minimum. It will help you defend against claims from patent trolls or former employees who want to profit from your company’s confidential information. It will also make it easier to prove that you took reasonable precautions to safeguard your information if an employee does steal personal data.
Maintain Confidentiality
Keeping customer, employee and business confidential information will help to fend off lawsuits. Sensitive identifying data should only be collected and retained when necessary for the business’s operations. Inventory computers, mobile devices, flash drives and disks to find where sensitive information may be stored in the company. Also, wipe out personal information from hard drives before disposing of them. A confidentiality policy should clearly describe what information is protected and the level of privacy an employee can expect based on the work they do for the company. It will give companies a solid legal defense should they be sued by patent trolls or former employees who want to profit from a company’s intellectual property.
In addition to a well-defined confidentiality policy, companies should educate their employees on state and federal laws against workplace harassment, discrimination and safety protocols. Regular training and open communication will help nip issues before they escalate to commercial litigation.
Stay Up-to-Date
Litigation is a reality for most businesses, and it can be expensive, time-consuming, and emotionally draining. By implementing legal best practices, mitigating the risk of litigation should be a top priority for entrepreneurs. Ensure your company follows all applicable laws by periodically assessing and revising its procedures. Non-compliance could have serious financial repercussions or damage your company’s reputation. You should also protect your business’s data and intellectual property by implementing cybersecurity measures and keeping records of all transactions. Finally, it would help if you understood e-commerce laws and digital copyright issues clearly.
Legal issues are just another cost of doing business for large corporations, but for small businesses, a frivolous lawsuit can sink their operations. With proactive steps to mitigate the risk of lawsuits, entrepreneurs can focus on growing their companies without worrying about a costly legal battle.