How to Protect Your Small Business Against Legal Action

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How to Protect Your Small Business Against Legal Action

Nov 03, 2022

Lawsuits are something no small business owner wants to deal with or even hear about, but you must know about them inside and out so you can protect yourself. Being prepared is vital and understanding the different ways that people can sue you will allow you to prevent making mistakes that leave you exposed. Let’s take a look at a few steps you’ll need to take to protect your small business against legal action.

Speak with a Business Lawyer

All small business owners should start their journey by speaking with a business lawyer. Unfortunately, working with a business lawyer is an afterthought for too many owners, and not speaking with one before you build a business is a big mistake.

They can help you pick the right business structure and keep your personal assets safe, for instance. They can also teach you about things like product liability, intellectual property, workers’ rights, and more. 

You will also need to think about keeping a business lawyer on retainer. This is especially the case if you need to draft or sign lots of contracts. A business lawyer will be able to review subcontractor contracts, for instance, or contracts for your employees. So, start looking for a good business lawyer right now, and find one that is familiar with your industry.

Speak with an Accountant

Another person you’ll need to speak to before getting started is an accountant. Accountants will be able to tell you about some of the rules regulating your sector and some of the things you’ll need to be aware of as you scale your business. 

Get Insurance

Getting the right type of insurance is also extremely important if you want to avoid lawsuits or deal with legal costs in case you do get sued. You will need to look into things like business liability insurance, general liability insurance, and errors and omission insurance, just to name a few. 

You might also need to get professional liability insurance depending on your line of business. Who needs professional liability insurance, you may ask? Well, anyone offering professional services directly to clients, like accountants, consultants, and real estate firms, among others. If you want to know more about professional liability insurance and if you’ll need it, the linked page explains exactly who needs professional liability insurance.

Be Careful with Who You Hire

There’s nothing worse than doing everything right as a brand only for one of your employees to ruin it through their actions. This is why you need to be very careful when hiring employees. 

Make sure that they will take their job seriously and have a sense of ethics, and double-check their record for blemishes since they could come back to bite you. It could also be a good idea to let a skilled HR team handle that part as they have the skills and resources needed to find, vet, and train employees properly.

It's almost impossible to completely avoid lawsuits, but you'll be able to significantly reduce the chances of being targeted by one if you follow these tips. First, make sure that you get advice from a professional and do everything that you can to follow the rules and regulations in your jurisdiction while making the well-being of your clients and employees a priority.

The opinions expressed in our published works are those of the author(s) and do not necessarily reflect the opinions of the National Association for the Self-Employed or its members.

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