7 Tips on Avoiding Lawsuits for Small Businesses

At one point, you’re going to get sued. About 90% of all businesses are engaged in litigation, and about 35% to 53% of small businesses are involved in at least one litigation. The thing about lawsuits is that they are expensive, taxing, time-consuming.

 

Even worse, they can seriously damage your reputation, so the best course of action is to avoid them. As a business owner, the responsibility of mitigating and limiting risks and keeping the business running smoothly falls squarely on you.

 

Avoiding lawsuits falls into this category. The question is, how do you limit any possibilities of a lawsuit? There are several actions you can take right now to protect your business from lawsuits in the future.

 

Why Avoiding Lawsuits Is a Wise Idea

Lawsuits are a different kind of challenge, especially for small businesses. One is enough to bring your business to its knees, and it only takes 5 minutes to ruin a reputation you’ve been trying so hard to build.

 

The thing is, you don’t even have to do anything illegal because all it takes is an injured employee or a dissatisfied customer. Of course, there are many other reasons for litigation, but you should go out of your way to avoid what you can.

 

1. Get Comprehensive Insurance

Having business insurance means you’ll be covered for a variety of issues. There are many different types of insurance for businesses you need to ensure maximum protection for your business. For instance, you need workers’ compensation insurance to protect your business against employee claims when they get injured on the job.

 

Professional liability insurance, auto insurance, business interruption insurance, are all just as important. These policies will protect you and your business from things like errors and omissions, defective products, and injuries to customers. Having these policies does not necessarily mean that your business is lawsuit proof, but they will protect your business from liability.

 

2. Make Workplace Health and Safety a Priority

Health and safety are paramount to your business, regardless of the kind of business you’re running. You need to ensure the safety of everyone that comes to your business, whether employees or customers. A lot of small business lawsuits revolve around the safety, health, and security of either employees or customers.

 

Strive to make your workplace as conducive as you can as far as these issues are involved. Some of the things you can do include installing non-slip floor coverings and providing safety equipment for employees. You should also ensure safety procedures are in place, provide training, and maintain sanitation and hygiene at all times.

 

3. Draft and Implement Company Policies

One of the most significant steps you should take when avoiding lawsuits is drafting and implementing company policies and procedures. Provide a job manual or employee handbook to ensure that your employees learn everything about these policies. Train everyone to follow these company policies and procedures as it will help prevent lawsuits.

 

Beyond this, it’s essential for you to be ethical, moral, and honest in your everyday practices so you can build a solid reputation for your brand.

 

4. Keep Your Employees Happy

Every state has employment acts and laws that protect both employees and employers. However, there is always a chance that an employee will find a loophole and sue you out of spite or a meager misunderstanding. Avoiding lawsuits involves keeping employees happy and making them your friends.

 

This means you could come to an agreement in the event of an issue without having to result in a lawsuit. Of course, you must ensure you’re compliant with employment laws.

 

However, it's important for you to cultivate relationships with them. Listen to their problem, solve issues promptly, and give them the respect they deserve.

 

5. Provide Customers With Excellent Services

Customers are like employees, and you need to treat them just as right. You and your employees should strive to please customers and offer exceptional customer services, which will also lower the chance of being sued. When they run into a problem with your products, it’ll be easier to come to an agreement without going to court.

 

Be wary of how you deal with complaints and threats of lawsuits from customers. You and your employees should keep you calm when dealing with delicate situations. Learn to manage such situations of conflict and to de-escalate a situation that could otherwise end in a lawsuit.

 

6. Separate Yourself From Your Business

Most small business owners mix business with personal matters, especially when they run their businesses as a sole proprietorship. The problem with this is that in the event of a lawsuit, your personal assets and finances will be dragged in the liability as well. The solution here is to ensure that your business is incorporated, which will separate you from the business.

 

7. Keep Accurate Records

The one thing you should learn as a small business is that accurate records are vital to lawsuits. You could lose a claim because you don’t have the records to back up your case. When getting into any kind of contract, whether with employees or customers, ensure that the contracts are drafted by a professional business legal team.

 

If you can’t afford a business legal team, at the very least, retain a professional business attorney or a registered agent that will take care of such matters. Contracts and copies of agreements are legally binding, so ensure you state everything about the deal because you can use them to get off a lawsuit.

 

The Best Ways to Avoid Lawsuits

The bottom line is, avoiding lawsuits is far better than having to deal with the aftermath. You may find that eventually, one or two lawsuits happen. As a small business, you can't afford to have litigation on your hands.

 

For this reason, take the steps listed above to ensure that you prevent lawsuits as much as possible. Now that you know how to avoid lawsuits, you need to learn more about managing your small business.

 

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