Don’t Get Sued, Get Smart!: 5 Tips to Protect Your Business From Costly Lawsuits

As a small business owner, getting unexpectedly caught up in a lawsuit can be both overwhelming and scary, not to mention a tremendous drain on resources. But you don’t have to sit around waiting for it to happen. There are many actions you can make to protect yourself in the event that one of your customers, employees, or suppliers tries to take you to court, and there are several best business practices that will help to ensure you don’t end up in court in the first place.


1. Learn about your insurance options. About a year ago, I put up a post describing the major forms of insurance small business owners should be aware of. It is good business practice to ensure that you and your assets are properly protected- especially if you are running a sole proprietorship or a simple partnership since under these business structures the owners are basically sitting ducks for claims against them or their business. For more information about business insurance, check out Insure U for Small Businesses.

2. Go into business dealings with a solid contract. One way to cover your back against a future claim is to make sure that well-written legal contracts are in place whenever you enter a significant business transaction. Some claim-prone transactions to consider are: the hiring of a permanent employee, the hiring of an independent contractor or freelance worker, when entering into a rental agreement for equipment or real estate, and in some cases when you provide a service or a product to a customer.

3. Read the fine print of any contract you sign. Where you or your business will be signing a contract, make sure that you are clear about the terms and conditions contained within. In many cases, it would be a good idea to have the contract looked over by a qualified professional (see below).

4. Keep your financial and legal documents in order. If a claim is filed against you or your company, then you don’t want to be caught with your pants down. Make sure that your financial and legal documentation is both available and accessible so you have a clear paper trail pointing to your activities.

5. Lastly, know where to get adequate legal assistance. Though the Internet is awash with do-it-yourself legal information and documents, I would be careful about relying on these avenues in most instances. Even if you think that by doing so you will be saving money, that savings can quickly evaporate should a claim arise from an unnecessary oversight. If you are concerned about financing legal fees then take you might want to consider using the services of where a small monthly fee gives you access to legal advice and assistance from a group of qualified attorneys.

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