For many large companies, litigation is simply part of the cost of running a business. However, small business owners may not have given much, if any, thought to what may happen if they find themselves targeted by a lawsuit. The fact is small business owners must also face the occasional threat of legal action. You can help take precautionary measures now to minimize the threat to your business should you ever have to face legal action.
Protecting yourself from personal liability
One of the biggest benefits of establishing a business entity is that it enables you to separate yourself personally from your business. This means you will avoid personal liability if someone decides to sue your business. However, if you are a sole proprietor or run a business with your spouse, your personal finances could be at risk.
If your business is not incorporated, now would be a good time to do so. It’s also crucial to maintain proper bookkeeping and accounting records. This is especially important for cases involving wage and hour claims.
Consider an insurance policy
There’s no way around it. Litigation is expensive. However, there are insurance options available that can provide you with some level of financial protection. Some policies are business-specific, such as an employment practices liability insurance plan or a director’s and officer’s insurance plan. A standard commercial general liability plan can also help protect your business from the financial fallout that accompanies litigation.
Think about working with outside counsel
Most small businesses don’t have a full-time, in-house attorney. However, you can work with a business law attorney on an as-needed basis. A skilled professional can help identify potential vulnerabilities, and is there should you ever have to confront the threat of a lawsuit.