Use Protection: How to Avoid and Handle Business Lawsuits
by Mashum Mollah Business Intelligence Published on: 11 March 2019 Last Updated on: 16 March 2020
What’s your worst nightmare as a business owner? If you’re like most people, it’s probably getting sued.
The bad news is that there’s a good chance your business could get sued. Every year, between 36 and 53 percent of small businesses are involved in at least one lawsuit. Ninety percent of all businesses are also involved in a lawsuit at any given time.
Don’t panic just yet. There’s good news, too. The good news is that there are a lot of steps you can take to avoid lawsuits and make sure you’re prepared to handle one if necessary.
Read on for some helpful information on avoiding and handling business lawsuits.
Types of Business Lawsuits:
Before getting into the specifics of avoiding and handling business lawsuits, let’s go over some of the most common types of lawsuits business owners are likely to face.
The most common types of business lawsuits include:
- Intellectual property disputes: These occur when someone uses your intellectual property without your permission.
- Breach of contract cases: These occur when one party violates the terms of a legally binding agreement.
- Employment disputes: These lawsuits may occur is an employee violates the terms of an agreement, or if an employee feels you’ve wronged them in some way.
- Partnership disputes: If you and your business partners cannot come to an agreement, a partnership dispute could occur.
- Shareholder litigation: This may occur is a shareholder in your company has a problem with the way in which you’re running it.
- Product liability and/or personal injury claims: If someone gets hurt while using a product that your company made or injured while on the premises of your business, you could face a lawsuit.
As you can see, there are many different types of lawsuits that can affect business owners. You can decrease your chances of dealing with these lawsuits, though, if you take proper precautions.
Avoiding Business Lawsuits:
When it comes to avoiding business lawsuits, there are several steps you can take. Here are some tried and true practices businesses follow to avoid being sued:
Put Everything in Writing:
Steer clear of verbal agreements and handshake deals. Whenever you’re making any kind of agreement with someone, put it in writing. This will save you a lot of headaches later on.
Hold Up Your End of the Deal:
You may not always be able to prevent lawsuits, but you can at least make sure your hands are clean. Always hold up your end of a deal. That way, you never nothing to hide should a lawsuit occur.
Understand and Abide by Employment Laws:
Make sure you understand state and federal employment laws before you start hiring employees. Make sure you’re abiding by these laws and aren’t accidentally engaging in any discriminatory or illegal practices.
Communicate:
Make sure you’re doing your best to communicate clearly with your employees, colleagues, and everyone else involved in your business.
Follow up verbal communication with an email or hand-written note. This helps clear up confusion and provides you with a paper trail should anyone ever call your communications into question.
Invest in Liability Insurance:
Liability insurance can provide you with coverage in a variety of situations, from slip and falls and other injuries to data breaches. Make sure to cover your business right from the start.
Be Proactive:
Do your best to spot and stop problems before they escalate into something serious and lawsuit-worthy. Talk to your employees and colleagues and make it clear that you’re available to listen if anyone has any concerns.
Separate Yourself:
It’s important to separate yourself financially from your business. Incorporating or registering your business as a limited liability company (LLC) will protect your personal assets should your business ever face a lawsuit.
Protect Your Data:
Make online security a top priority. A data breach could be detrimental to your business. Make sure you’re updating software regularly and backing up your files to protect everything.
Hire a Lawyer:
Be sure to hire a small business lawyer early on, too. Don’t wait until you’re already involved in a lawsuit to look for legal representation.
Have a lawyer on your team from a trusted firm like Appearance Attorney so that you will have someone to turn to when you’re unsure of what to do and want to make sure you’re not getting into legally questionable territory.
Handling Business Lawsuits:
Of course, it’s important to understand that, while all these steps can help you avoid lawsuits, they’re not a guarantee that you’ll never deal with one.
In the event that your business does get sued, these are the steps you should take to handle the lawsuit appropriately.
- Review the case with your attorney right away
- Don’t communicate directly with the plaintiff — this could make matters worse
- Reach out to your insurance provider and let them know about the lawsuit
- Submit a written response to the lawsuit by the deadline (usually within 30 days of receiving it)
- Don’t try to cover things up — the truth will likely come out, and proof that you were covering things up will just make the situation worse
- Focus on the business and do your best to keep things running as usual
- Protect yourself from additional lawsuits — update your employee handbook, deliver harassment training, etc.
Keep these tips in mind and you’ll be able to keep your cool while addressing any lawsuits with which your company is met.
Looking for More Legal Advice?
No business owner ever wants to be in a position where they’re dealing with a business lawsuit. The truth, though, is that legal issues arise every day, even for the most cautious of businesses.
Now that you know more about avoiding and handling these lawsuits, you can rest easy knowing that you’re prepared in the event that you ever do need to consult a lawyer.
Do you want to learn more about situations in which you might need a business lawyer? Or the benefits of having a lawyer on retainer?
Check out this article on reasons to consult a lawyer for your business for more important information.
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