Is Your Small Business at Risk for a Lawsuit?

The simple truth is that all small businesses are at risk of lawsuits. If you have customers or employees, the risk is there. As a small business owner and/or manager, it is up to you to make sure your small business is adequately equipped to defend itself when it becomes necessary to do so, with as little risk as possible. These are a few of the things you can do that will help your business weather the storms potential lawsuits present.


1) Establish contracts. This is a must for small businesses and can help many business owners avoid nuisance lawsuits. We live in litigious times and the old standard of a smile and a handshake, or gentleman’s agreement, doesn’t always cut it anymore. The real beauty of contracts is that they leave little room for misunderstandings in the future. Both parties know their responsibilities and expectations from the start. It protects your business, your employees, your vendors, and your customers.


2) Document everything. Whenever accidents or incidents happen, it is important to thoroughly investigate and document the incident and the findings of your investigation. You’ll need this information, if it comes to a lawsuit, in order to go to your attorney armed with the facts and determine whether or not a settlement is wise.


3) Acknowledge employee complaints.  It’s amazing how quickly minor employee grievances can become harassment claims. It’s much better to take the complaints seriously from the start so that employees don’t feel as if you’re ignoring their needs or allowing unwanted and/or illegal harassment to continue in your business.


4) Know Your vulnerabilities. Almost every industry faces unique vulnerabilities when it comes to lawsuits. Know where your weaknesses are and take active steps to limit your exposure. Prevention is always the best cure – especially when it comes to lawsuits.


5) Get adequate business insurance. There aren’t enough ways to stress the importance of business insurance that covers liability in situations such as these. No matter how frayed the shoestring of your budget happens to be, this is one expense no business can afford to skip.


6) Address customer complaints.  No matter how small or inconsequential the complaint happens to be, it is in the best interest of your business to take it seriously. Most of the time, customers only want their complaints to be acknowledged and to feel as though you, as the owner or manager of the business, are taking it seriously. However, if they feel ignored or slighted it can become a legal and/or public relations nightmare for your business.


The steps aren’t large and most of them do not require a lot of time and attention on your part. However, ignoring these steps can lead to major legal problems for your business that cost your business so much more than money.