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3 Ways to Lawsuit-Proof Your Business

By Andrew Lu | Last updated on

When you start a business, you'll have a lot of things on your mind (like actually getting your business off the ground). But you'll also want to think carefully about how to make your small business lawsuit-proof.

In fact, most owners don't consider the legal aspects of their business until they're actually defending themselves in a lawsuit. That's not a fun experience, and it's not cheap either.

There is some credence to the old adage, "an ounce of prevention is worth a pound of cure." Here are three ways you can protect your business from lawsuits, as suggested by Crain's New York Business:

  1. Pay Attention to Employment Matters. Employment lawsuits are among the most common faced by small business owners. Many take shortcuts with their own employees during the hiring process (e.g., illegal interview questions or screenings), during employment (e.g., wage and hour violations), and during the termination process (e.g., wrongful termination, discrimination and harassment). You should work with an employment or small business attorney if you are going to hire any employees to ensure that you follow all the legal requirements.

  2. Don't Violate Intellectual Property Laws. Even if you are not a high-tech firm, you will need to know something about intellectual property law. For example, the name you choose for your company may infringe on an already existing company, even if your company develops software, and the other company tests dog food. Also, if your company produces anything of value, there may be issues over who owns the work created -- you, your employee, or the customer. These are all issues that you will want to talk to an IP attorney about.

  3. Scrutinize Your Contracts. Always read the fine print when you enter into a contract, or hire someone who will. Too often, small business owners are taken advantage of by vendors or even their own business partners. You want to know what you are signing, keeping in mind that most contracts are negotiable.

Dealing with lawsuits is an unfortunate part of running a business. However, if you address these areas to protect your business from lawsuits, you'll be able focus your energies on running your business as opposed to fighting in court.

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