3 Ways to Protect Your Business From Litigation

It goes to say that no business, large or small, is completely safeguarded from lawsuits. However, as a small business owner, there are a few things that you can do to make litigation less likely to occur, and to prepare for the worst if it actually does actually happen. After all, preparation and prevention are definitely simpler steps to take than fighting a frivolous lawsuit in court. So, here are just a few things that you can do to protect your company from litigation.

Put Everything in Writing

Oral contracts cannot be proven, and therefore do not hold up in court. That is why all agreements between your business and any other person or entity should always be put in writing. Of course, it goes without saying that you should also have your company attorney look over each contract and recommend particular wording and clauses to protect your business’s interests.

 And, if you really want to play it safe, have your lawyer put a pre-suit mediation requirement in every single contract you draft. This type of contractual clause will require all parties to mediate any dispute prior to filing a complaint in court.

Never Commingle Finances

This doesn’t apply if your small business is a sole proprietorship, because your business and your person are considered to be one legal entity. However, by establishing an LLC, or a corporation, you will be able to legally distinguish between your finances and those of your business. That means that if your company were to get sued, and be liable to pay a judgment, it would not affect your assets at all.

Insure Your Business Against Litigation

If you invest in public liability insurance, the policy will probably pay out settlements and judgments on your business’s behalf, protecting company assets. Some professions even require that some type of liability or malpractice insurance is purchased prior to operating. Insurance like this is usually bundled with policies that protect your company from income loss, due to business disruption, and property damage, though it can also be purchased separately.

In conclusion, if you are worried about fighting litigation or avoiding it altogether, it is always best to contact a lawyer for the best advice. However, the tips above will provide you with a solid foundation that should allow your company to keep its nose clean and keep it from getting sued. If you follow these steps, though they will not protect you completely, you will have a better advantage going forward than if you don’t do anything at all.