Don't Get Sued: 6 Tips to Protect Your Small Business

By Logan Berger posted 08-09-2019 10:16


If you own a small business, you’re probably more concerned about your cash flow and making sales than about possible lawsuits. However, being sued can have a very negative impact on your business and you need to do whatever you can to prevent this from happening. Here are five actions you can take to protect your small business.

  1. Separate yourself from your business

The business structure you choose will affect everything from the way you operate, to taxes, to whether your personal assets are at risk. You need to choose a business structure that offers you the right balance in terms of benefits and legal protections.

If you operate your business as a sole proprietorship, it means your own assets can be attached in event of a lawsuit. Consulting with an accountant or lawyer can help you to choose the right business structure.

  1. Watch what you say and do

If you do business with unscrupulous individuals or make questionable public announcements, it can damage your integrity.

Even if your own ethics are above reproach, doing business with those known for unethical business practices will mean that your business name is linked to theirs if there is any fallout. Slanderous statements about your competition could land you in legal hot water.

  1. Protect your property from fire etc.

If you're a property owner, the building needs a fire alarm system and/or a water-based fire protection system. If this is not operational, State law requires you to implement a fire watch. Fast Fire Watch Guards, is a company run by professional firefighters that operates nationwide.

Failure to operate in event of a disaster like a fire or a flood could lead to an inability to live up to certain contractual obligations or satisfy other financial or legal agreements.

  1. Take out insurance

Every business should have liability insurance which covers various risks. A general liability insurance policy usually protects against bodily injury, damage to third party property, personal injury and advertising injury.

Many other types of small business insurance can offer further protection. Insurance brokers can help you to select the right products for your particular business.

  1. Work with a lawyer to draw up contracts

All your business contracts should include certain legal phrases and clauses. Get the help of a lawyer to draw up your contracts to make sure you’re protected.

It may seem like a sizable expense for a small business but it’s worth it because a small error in a business contract can result in a lawsuit.

For example, you need to include a clause stating you are not liable for incomplete work if it’s caused by uncontrollable circumstances, such as serious weather conditions or the actions of one of your suppliers.

  1. Take cyber security seriously

Businesses are increasingly using digital technology and storing client and customer data on local computers and in the cloud. The risks of cyber attacks are increasing. You must have security software on your computers to protect your files. If key files are stolen, clients or vendors could take legal action against you.

You should always have a set of back-ups to refer to, and update them on a daily or weekly basis. Keeping them off-site can ensure safety. If you do keep them on your premises, they should be stored in a fire-proof safe.

The Bottom Line

If you take the above actions, you can dramatically decrease the risks of your business landing up in court. A lawsuit can be crippling to a business, costing a fortune in legal fees if your case goes all the way to trial.