In the modern world more and more people are setting up their own business, often without all of the skills and acumen needed. As a business owner it is important to realize that the buck stops with you and as such you need to be prepared for all eventualities, not least from being sued, so that your business can run smoothly. It is important to protect your business from lawsuits. You may have employees and you also have a responsibility to them as well as to yourself.
So how do I go about protecting my business from lawsuits? Here we will look at the most effective methods.
It is an integral part of business finance that you keep it separate from your personal finance. You cannot be in a position whereby you are using business funds to help fund your personal life as this is bordering on the edge of fraud. If you operate as a sole proprietor then your personal assets are also on the line should something go wrong, so think about setting up a Limited Company, which will help limit any potential personal liability. You do not want to be in a position where your personal assets are within reach of a creditor, as attorneys are like hawks and will try and seize every possible asset for their gain.
As a matter of course any business should have liability insurance to protect against unknown events such as someone falling over on your premises and breaking a leg. Often this type of insurance is a legal requirement, but there are also other ways of protecting yourself. Maybe you provide advice? If so, think about getting protection in case you make an error or omit something important. Large businesses may decide to protect their board of directors by taking out liability insurance to protect their personal assets if a larger suit is brought against the company. It is also important to have liability clauses in your contracts so if a 3rd party does something to damage you, then you are covered.
This needn’t be as expensive as it sounds as your legal budget should be for protecting yourself against litigation rather than fighting litigation. Legal professionals from www.warnetthallen.com recommend that something as simple as a business contract is checked over by a lawyer and if possible an approved contract is used for all transactions, that just needs tweaking on a case by case basis. If you receive a contract from a 3rd party, always have your lawyer approve it. It is much better to spend pennies now rather than thousands of dollars down the line fighting a lawsuit. Do not forget employee contracts either, it is just as important that you are protected against them as it is with your business contracts.
It is essential that you keep good records of all your business activities, in both an electronic and physical form. On many occasions disputes can be resolved simply and cheaply by providing accurate documentation. Email and phone records should also be kept where it is practically possible. Remember, it is not only your business partners you need to protect yourself from but also governmental entities such as the IRS. Much wiser and cheaper to have all your financial records at your disposal should they come knocking on the door, rather than to have to go through the expensive process of hiring professionals to defend you.
As we have seen, the way to protect your business from lawsuits is not as complex as it sounds because with a little bit of common sense you will find you have all the protection you need. Separate all personal and business funds at the outset and structure the company so you personally can not be financially liable. Use a lawyer to check all contracts and to oversee negotiations, you will save a fortune on litigation costs in the long run. Keep tight records so that if the IRS does come knocking you can justify each step you made, and most importantly be proactive, if you can always negotiate you are likely to reach a much more agreeable resolution.