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5 Tips to Prevent and Prepare for Business Lawsuits

By Ephrat Livni, Esq. | Last updated on

You worry about your business and try to do everything you can to help it thrive. You set goals, you have plans, and you are strategic, thinking long term. But one thing still stumps you. How do you avoid lawsuits?

Well, there are no guarantees for anybody, person or business. But there are some things you can do to stay out of trouble, or to at least be prepared should you get sued. Here are five tips that will help get you thinking about lawsuit preparedness and prevention.

Tips to Avoid Liability

1. Hire a Lawyer. Get to know an attorney long before you are ever sued, preferably when you start your business. Cultivating a relationship with a commercial attorney means you have someone to call at every step. Even if your lawyer does not handle the particular problem you run into, counsel can refer you to the appropriate experts and advise you about general strategy. Certainly, you should consider getting counsel to structure your business legally.

2. Separate Yourself. Yes, you are married to your business in a way. But make sure that, legally at least, your business is a separate entity from you the individual. Do not run your business as a sole proprietorship or you will find yourself personally liable should you get sued.

3. Associate Carefully. Your business is like a person. It has a reputation and how it is seen is impacted by its associations. If you want to ensure that you have and maintain a good relationship, you must act ethically and be above reproach, and you must make it a point to associate with other trustworthy enterprises.

4. Avoid Conflicts of Interest. This tip is an extension of the first, essentially. You need to ensure that your motives and relationships are unimpeachable to protect the integrity of the business. That means avoiding situations that are improper and even those that only seem improper. Be extra vigilant.

5. Get Covered. Make sure that you have the proper insurance. Here is yet another area where your lawyer can help you. Apart from the standard coverage your business needs, consider added policies that will limit your financial liability in the case of unavoidable lawsuits.

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