Managing a small business is a rewarding venture but can be challenging at times, especially if you’re running with limited financial resources. Often, entrepreneurs are more concerned about making a new sale and generating cash flow, while ignoring other factors that can significantly affect their business.
As awful as it may sound, small businesses are not spared from financial problems. These often lead to lawsuits, bankruptcy, and a huge pile of debts. Business owners turn to bankruptcy lawyers to get a fresh financial start and identify the best debt relief option for their specific situations. It also takes the stress out of filing for bankruptcy by allowing a highly experienced legal team to handle the entire legal process.
Aside from bankruptcy, one of the worst things to happen for a business is to get sued. The impact of a lawsuit on business goes beyond finances; it can be unpredictable, stressful, and time-consuming at the same time. For small businesses, an accusation related to a pending lawsuit results in serious damages to their reputation. To secure your business from devastating outcomes and crippling expenses of a business lawsuit, here are ways to avoid getting sued and protect your business interests.
Observe the right HR policies
Familiarity and adherence to employment laws are very important. To avoid getting sued by an employee, it’s important to be aware and follow employment policies. There are plenty of federal and state laws that govern a workplace, including laws on discrimination, workplace harassment, safety regulation, wage and hour laws, and employees’ privacy rights. Once you violate any of these laws, you’ll end up in a costly and stressful lawsuit.
The key to prevent an employment lawsuit is to identify which employment laws apply to your business and the requirements associated with them. Then, create and implement proper guidelines to ensure proper compliance.
Companies are avoiding lawsuits from employees by prioritizing their health and well-being. They also provide an employee handbook that states office policies, clarifying that the company does not accept inappropriate behavior and harassment. To create a safer workplace, employees should be aware of the company’s expectations and proper measures when an incident occurs.
Even small businesses will find it helpful by hiring an employment lawyer and HR consultant to seek guidance on preparing an employee handbook and proper hiring procedures.
Apply for liability insurance
Although an insurance policy doesn’t keep your business from getting sued, it helps separate your business and personal finances from the monetary strains related to a lawsuit. It reduces the chances of having piles of debts since you have the money to cover the losses. The insurance firm will negotiate settlements, investigate claims, and pay for liability costs and legal fees. It also covers several risks, from workplace accidents to a data breach.
Liability insurance comes in different types. You will need an experienced insurance agent for this to get the ideal insurance policy to protect your business and financial assets. When reviewing insurance policies, make sure it accurately covers your business. Familiarize if the policies are appropriate for your business and understand the coverage of these policies, such as product liability, errors and omissions, commercial liability, auto, workers, and property.
Aside from buying insurance, provide liability protection for your contracts. You’ll find this helpful if a certain supplier, natural disaster, or other uncontrollable scenarios prevent you from fulfilling a contract and expose you to a specific legal action. State in the contract that your business is not responsible for unfinished work because of the previously mentioned factors. Discussing these things with a lawyer will help you which legal clauses and phrases you will include in the work contracts to reduce legal actions in the long run.
Put everything into writing
There are plenty of “handshake deals” in the business world. Without a document to record the bargain, you’re risking yourself for misunderstandings that can lead to lawsuits.
A good record-keeping and signed agreements serve as life-savers that help businesses resolve conflicts and clarify each party’s duties and rights. It’s a standard practice for any organization to have an accurate record of each transaction that includes the time and date of the agreement and topics discussed at every meeting. Any form of communication such as emails, calls, and phone calls must be documented because you’ll find them useful when an issue occurs.
While managing a business, it’s easy to get too caught up in its daily operations, but don’t forget to take a step back and look at other aspects that need proper attention as well. Evaluating the potential risks of your businesses and applying the rights steps to reduce liabilities is necessary for smooth-flowing and successful operations. If you got sued, stay calm and surround yourself with the right people when seeking legal help.