Most small businesses do not enjoy the protections large corporations have in place to defend against possible lawsuits.
However, legal issues can arise at any time for any business owner. Here are four ways to protect your company against the possibility of litigation.
1. Reducing your personal liability
If you are a sole proprietor or perhaps own the business with your spouse, a lawsuit could put your personal income and assets in jeopardy. To reduce this possibility, be sure to keep proper records, file taxes properly and follow other examples of “corporate form.” If the separation between your personal and business accounts is not sufficient, the opposing party can hold you personally liable.
2. Understanding insurance options
There are several kinds of insurance many small businesses prefer such as Employment Practices Liability Insurance (EPLI), Commercial General Liability (CGL), Directors and Officers (D&O) and Environmental Insurance. Many insurance policies will reimburse you for the costs of resolving a lawsuit.
3. Implementing a litigation hold
If a lawsuit does arise, you should first notify your attorney and then place a litigation hold on information related to the suit. This means securing documents both in hard copy and digital format. If you or your employees should lose or destroy any pertinent information, the court may apply sanctions that could harm your business.
4. Relying on professional guidance
Put together a team of professionals including an accountant and an attorney who can help you keep your business on track and in “corporate form.” Legal guidance and support will be especially important if and when a lawsuit appears on your horizon.