Operating a business is a big undertaking. As a business owner, you need to ensure that everything you do can keep the business running smoothly and afloat. Most businesses have an attorney on deck, but don’t take the time to think about how they can prevent lawsuits. For some reason, most businesses tend to overlook lawsuits until they are hit with one. Lawsuits can be time-consuming and costly. You can find yourself suddenly faced with one and being unprepared to handle it. You should take preventative measures to protect your business and avoid getting sued. Here are 5 ways you can prevent a lawsuit from being filed against your business.
Form a Business Entity
You should separate your business from yourself by forming a business entity. If your business isn’t incorporated, you need to do this as soon as possible. Incorporating a business separates your personal finances from any liability tied to your company. If there is a lawsuit and a settlement from it, your personal finances won’t be affected. You don’t have to be concerned that any of your personal assets will be affected. While it’s common for business owners to operate as sole proprietors, that won’t protect you from a lawsuit. Your assets can then be tied to the lawsuit as a sole proprietor. It’s a scary thought that your bank account, home and car can be easily attached to the lawsuit. Protect yourself by incorporating your business.
Have Well-Drawn Contracts
Just like carefully crafting bylaws, you need to craft well-drawn contracts for your business operations. You need to think about every issue that could arise between you and a client. Don’t use generic, universal language in your contracts. These are the “Four C’s” of a well-drawn contract.
- Clear: The language in your contracts should always be very clear for clarity. A contract is not the place for being vague or misleading. Spell it out, so the client has no misunderstandings.
- Conciliation: Be sure to include detailed provisions in the contract for handling disputes. This is essential in any contract. If you don’t do this, you just may find yourself in a long drawn out courtroom battle when a dispute does arise.
- Current: Using outdated contracts is a no-no. Likely, the contents don’t apply anymore. Plus, there are likely new elements that are missing that do apply. Keep your contracts updated at all times.
- Costs: If a dispute does arise, resolve as soon as possible. This will save you from having to incur costs associated with courtroom battles.
Always Provide Excellent Customer Service
If your customers or clients get upset with your business, they are more likely to file a lawsuit against the company. Always practice above average customer service to protect your business from an angry customer. Make sure your employees have been carefully trained on how to manage an escalated conflict. Have solutions in place for your employees to implement. This will deescalate the situation and avoid a potential lawsuit against your business.
Get a Good Insurance Policy
While an insurance policy won’t stop your business from getting sued, a good liability business insurance policy will ease any financial stress from a lawsuit. A good insurance policy will likely cover liability costs and any legal fees. You can choose from a wide variety of business insurance policies, but do your research and choose wisely. A good business insurance policy will protect you from an employee filing a lawsuit after being injured on the job. It will also provide you with errors and omissions coverage. That will protect you against a lawsuit filed by a client alleging that you make a mistake during a project or did not live up to the contract. It can be complex trying to navigate the different business insurance policies, so talk with an insurance broker for help and advice.
Avoid Discrimination and Harassment Like the Plague
Today, workplace harassment and discrimination are raging. Often, it’s perpetrated by managers and supervisors towards employees. And managers and supervisors aren’t even aware they’re doing it until a complaint is filed. They may make an innocent comment not realizing it’s actually discrimination or harassment. Make sure to deal with those types of complaints before they progress into a lawsuit. Having a paragraph about harassment and discrimination in your company handbook is not enough. Make sure your entire team is educated and trained about discrimination and harassment in the workplace, especially management. Harassment and discrimination are the most common ways for a business to be sued. Follow these 5 tips and you’ll be able to prevent disputes from happening and being sued. A pound of prevention is worth a pound of cure. It’s always wise for a business owner to think about what can go wrong within the business and take effective measures to prevent lawsuits from occurring.