When starting a business one of the last things on the business owner’s mind is the possibility of a future lawsuit. Unfortunately, both small and large businesses face the risk of a possible lawsuit and a majority of those lawsuits are frivolous. The threat of a lawsuit is not declining; in fact, the number of lawsuits filed has increased over the past twenty (20) years. Business owners have to be extra careful as lawsuits can be filed by individuals both outside the business (by customers or competitors) and from inside the business (by employees).
There are several strategies that a business owner can implement to reduce the risk of a lawsuit arising. A few of these strategies are listed below:
1. Watch Your Words. It is important that a business owner be very careful about what they say to their clients and their employees; a statement can be easily misunderstood and result in a fraud claim or an off-color joke could be considered harassment. It is recommended that you stop and think carefully about the potential repercussions prior to making any statements or issuing anything in writing.
2. If in Doubt, Don’t Do It. The business world is not black and white; there are a number of gray areas. In order to avoid a potential issue, a good policy is to consult with your business attorney prior to taking an action if you have any concerns about the legality or possible consequences of that action. If you are unable to consult with an attorney, it is recommended that you hold off on taking the action until you can. The old maxim “better safe than sorry” is still a good rule to follow when running a business.
3. Consult with the Right Type of Attorney. As stated above, it is important to consult an attorney when establishing your business. What is more important is that you consult with the right type of attorney. Just like doctors, attorneys tend to focus their practice on certain areas of law and finding the right one can save you time and money. It is not worth your time (or money) to talk to a criminal attorney about negotiating a commercial lease; you should instead find a business transactional attorney who has experience dealing with commercial real estate.
4. Protect Yourself with Insurance. There are various types of insurance available to businesses ranging from coverage on your employees to insuring your inventory. It is important that you speak to an insurance agent who has experience protecting businesses similar to yours about the different types of insurance available and the policy levels that best suit your needs. Be aware that this agent will likely not be the same agent who handles your homeowners or automobile insurance policy.
5. Build Walls Between You and Your Business. The best offense is a good defense. The first line of defense for most business owners is the personal liability shield provided by formally organizing the business into a legal entity (like a corporation or limited liability company). If your business is a sole proprietorship or a partnership, you do not have such protection and you could be held personally liable for the debt of the business. This could possibly allow your creditors to gain access to your personal assets and collect upon them.
The majority of most business related lawsuits can either be avoided or resolved through calm, careful planning. Employing the strategies above will help you to stay aware of potential lawsuits and may reduce the risk of a lawsuit occurring.
Should you have any questions about establishing policies and procedures to protecting your business from potential lawsuits or any other law that may affect your business, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.
This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.