If you are a small businessperson, it is not unreasonable to think that you might face a lawsuit at some point in your career.
Knowing how best to protect your business is essential, and fortunately, there are several effective steps you can take to do so.
Understand your liability
If you own a corporation, you work behind a “corporate veil” that protects your personal liability. However, if you are a sole proprietor or perhaps own the business along with your spouse, any legal problem that arises can put your personal property at risk. The effort of defending against a lawsuit can run into the thousands of dollars with disastrous financial consequences.
Explore insurance options
There are several insurance options that can help protect you and your business, including:
- Employment Practices Liability Insurance (EPLI)
- Commercial General Liability (CGL)
- Directors and Officers Insurance (D&O)
Also, as a small businessperson, you may already carry workers’ compensation insurance in case an employee sustains a work-related injury.
Implement a litigation hold
If you suspect a lawsuit is in the offing, put a litigation hold in place. Secure any hard copy or electronic documents that might contain pertinent information. The court can penalize you for losing, throwing away or deleting such information.
Establish professional relationships
Developing relationships with outside professionals such as a financial advisor and an accountant can help keep your business humming along in accordance with state and federal regulations. It is also essential to be able to seek legal guidance as soon as you anticipate that a lawsuit is imminent. The better prepared you are the more likely it is that you will survive a litigious attack that is potentially damaging to you and your business.