The thought of being sued, whether by a customer or client or someone else entirely, is a scary concept. In fact, it is one thing many small business owners are leery of the most. While it makes starting your business intimidating, there are some things you should know about potential lawsuits, including ways to reduce your risk. One thing to think about is that all businesses are at risk of being sued, even if you do everything right. But by understanding the risk and prevention of lawsuits, you can better protect your business.
Reduce the Risks of Lawsuits
The first thing to understand about being sued, is that in some cases, you can prevent it from happening. Or you can at least reduce your risk significantly. Here are some tips for reducing the risk of lawsuits for your business:
Incorporate – By forming a Limited Liability Company (LLC) or Corporation, you can protect your personal assets in the case of a lawsuit. This doesn’t prevent you from being sued, but it makes sure your personal assets are not affected by the lawsuit. If you are a sole proprietor and you fail to form an LLC and are sued, your home, retirement plan and savings are all in jeopardy. As long as you keep up with your LLC or Corporation by filing your taxes on time and keeping up with paperwork, you won’t have a problem.
Identify Common Risks – Before a potential lawsuit occurs, determine and identify which are most common for you. Every business has risks of liabilities and lawsuits, though many are different. If you run a construction company, your biggest risks include possible damage to homes or businesses you are doing remodeling work for. This helps you know what areas of protection your business needs and steps to take to reduce your risk for lawsuits.
Protect Your Home Business – If you run a business out of your home, rather than in an office building or other location, your needs may be different than other small businesses. In this case, you should have at a minimum have an homeowner’s insurance policy that allows for a “home-based business rider” for additional protection of your business.
Document Complaints – If a customer or client makes a client, don’t be casual about it. Take it seriously and get proper documentation. Ask for their exact circumstances surrounding the complaint and do what you can to get it resolved. Many times, by acting quickly and going above and beyond, you can prevent a lawsuit entirely.
What to do if You’re Sued
It isn’t always possible to prevent a lawsuit, especially if an accident was involved. But with these tips, you’re taking the right steps to get it take care of and have the best final result.
- Act Quickly – As soon as you find out you are being sued, start acting. Gather any documentation or contracts that will help with the case and start speaking to your employees if they are related to the lawsuit or what has occurred. You will typically have a short deadline for filing paperwork after a lawsuit, so you need to act fast.
- Have Legal Help – Your business should already have a lawyer to handle these situations. If not, get one immediately. Seek help from your legal team as soon as a lawsuit has occurred and provide them with the necessary information to start the litigation process.
- Inform Your Insurance Company – You will need to let your insurance company know when you are sued. They will provide you with information regarding what is and is not covered for this lawsuit.
Before a lawsuit ever occurs, make sure you have proper business insurance. It should protect your most significant risks, including liabilities and litigation’s.