5 Ways You Can Avoid Disastrous Financial Repercussions of Getting Your Business Sued
Limiting risk is one of the most important challenges facing today’s small business owners. Most business owners don’t plan on being sued, so many fail to consider the potentially disastrous financial repercussions that could come along with a lawsuit. Instead of waiting until something goes wrong and panicking, read on to find out about five ways business owners can avoid financial risks stemming from lawsuits.
Adequate Insurance Coverage
Comprehensive commercial insurance policy packages provide businesses with the asset protection they need to avoid financial ruin should they face unexpected lawsuits. What’s great about commercial insurance packages is that they can be tailored to each company’s needs, so businesses only have to pay for the coverage they might actually use.
Just about all companies need general liability insurance, worker’s compensation insurance, and cyber liability insurance, but there are far more policies available to businesses that own their premises, own fleet vehicles, or operate in niche industries. Learn more about policy options online or ask how to create a tailored commercial insurance package when you contact garrity-insurance.com.
Find an Attorney
When a business is sued, the first thing the business owner should do is contact his or her attorney. It’s important for business owners to do their research and find the right attorney before something goes wrong instead of waiting until after the company gets sued. Retain an attorney with expertise in business litigation to ensure he or she will be able to provide sage legal advice should anything go wrong.
Separate From the Business
Entrepreneurs and small business owners often own and operate their companies as sole proprietorships. This is a mistake. If the company gets sued, the owner’s personal assets can come under attack if he or she operates it as a sole proprietorship.
There are several better options. Business owners can separate themselves from their companies by starting a trust, incorporating, or establishing a limited liability company (LLC). Business owners can complete most of the processes required to establish their companies as separate entities themselves, but it’s much wiser to consult an attorney and a business accountant for help.
Maintain a Positive Reputation
Maintaining positive relationships with employees, vendors, customers, and others can help to prevent unnecessary lawsuits. Make sure all employees know to avoid conducting business with questionable customers or clients and follow best practices for creating a healthy work environment to avoid employee lawsuits. While it’s a mistake to assume business owners can guarantee, through their own actions, that their companies will never be sued, so taking steps to protect against unnecessary or frivolous lawsuits is always a good idea.
Modern companies face more threats than their predecessors, and more lawsuits than one might like to assume actually originate as a result of data breaches. Hire a security officer or a third-party IT company to ensure that all sensitive data used by the business is protected, and consider taking out a cyber insurance policy.
The Bottom Line
Business owners should take every step possible to protect their companies against lawsuits, but there’s only so much they can do. That’s why it’s equally important to protect commercial and personal assets by taking out insurance policies, creating separate business entities, and keeping a lawyer on retainer to ensure that business owners know who to call if something goes wrong.