Can you really 'lawsuit proof' your small business?

One of the worst things that could happen to a small business is a lawsuit. Lawsuits as a general rule, can be time-consuming, very costly and will distract key business members from their primary goal of running the company. Luckily, there are ways to help greatly reduce the chance that your business will face litigation.

Taking steps to protect your small business

Having an experienced business law attorney draft or at least review contracts signed both internally (between the company and employees) and externally (between the company and vendors, suppliers, manufacturers, distributors, etc.), is an easy and relatively inexpensive way to protect the business from liability and keep valuable assets from being exploited.

The small business industry website "Rescue a CEO" has compiled a list of several other actions that can be taken by business owners or managers to limit the prospective lawsuit possibility:

  • Accept the possibility that a lawsuit may happen, and make steps to limit the company's legal exposure; they are much more common than people think, since small businesses spend an average of $100 billion annually in litigation costs
  • Take complaints of misconduct, wrongdoing, product defects or other allegations seriously, thoroughly investigating each one before deciding whether they have merit
  • Consider purchasing liability insurance, particularly if your business is in an industry where legal issues happen with frequency
  • Getting all contracts, no matter how small or unimportant they may seem at the time, in writing, both for products purchased by the company and those being made or sold by the company
  • Have a legal audit of the company performed by an experienced business law attorney in your area

A recent piece in Crain's New York Business also gave an excellent example of how an attorney's involvement is key to protecting a business' intellectual property: the hiring of a freelancer to produce content without the proper disclosures and waivers in place. If a freelancer is hired to produce creative content like a song, article or book, without signed contracts specifically identifying the content as "work for hire" (i.e., produced specifically to be used by the one paying for it and only belonging to the one paying for it), then the original freelancer could actually make a convincing case for 50 percent ownership in the work product.

Running a small business is oftentimes a labor of love; you do it because you love it. That doesn't mean that you aren't serious about being a success or about turning a profit, though. The help of a business law attorney can greatly increase the chance that you can avoid common lawsuit pitfalls that could turn your company into a litigation magnet or could result in some of your best assets being used against you.

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