As a small business owner, you want to be able to hold your own in any dispute that arises. Disputes can escalate quickly, and you may feel that the threat of a lawsuit would find you at an extreme disadvantage. Here are tips to help you keep business issues from getting out of hand. Know your level of liability In a corporate structure, there is separation between you and the business in terms of liability so that if a lawsuit develops, your personal property is protected. However, you may be a sole proprietor or own the business with your spouse, in which case your personal income and savings may be at risk. If someone sues you, the court will examine your corporate form; that is, whether you keep your bank accounts and tax returns separate, whether you keep proper payroll and inventory records and more. Depending upon its conclusion, the court might allow the originator of the lawsuit to hold you personally liable. Explore insurance options If you worry about protection, the more positive news is that there is help for you and your business through one or more insurance options:
- Employment Practices Liability Insurance
- Commercial General Liability
- Directors and Officers Insurance
- Workers’ Compensation Insurance
Count on legal guidance Every business needs legal assistance at one time or another, and the relationship you develop with an attorney will be valuable if a contentious situation arises. Resolving a dispute before it turns into a lawsuit will protect your business and save you money in legal fees. Prepare for litigation If the worst happens and litigation appears imminent, your first step is to notify your attorney. The next step is to secure any paper or electronic documents related to the matter in a “litigation hold.” Do not allow staff to delete or destroy any pertinent information. Litigation can be very damaging to a small business, but with proper preparation, you and your business should survive if a dispute becomes a lawsuit.