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How Can Entrepreneurs Reduce Legal Liability?

By Christopher Coble, Esq. | Last updated on

When you're putting together your business plan, or when you're putting that plan into action, one of the forgotten costs is legal risk and liability. After all, we don't feel very optimistic adding a line for lawsuits into our budget, and although business litigation is common, it's not inevitable.

One way to avoid a lawsuit, and the subsequent drain on your capital and corporate culture, is to plan ahead. By protecting your company, your employees, and your customers, you can reduce your small business's legal risk and liability. Here's how:

Your Company

Limiting liability starts from day one, by choosing a business structure that limits personal liability. If you started out as a sole proprietorship or partnership, you should consider switching to a corporation or limited liability company that can separate your company's liability (and assets) from yours.

Also, make sure your small business is properly insured. This goes way beyond your basic general liability insurance or workers' compensation plans. Depending on your small business, you may also need cybersecurity insurance, social media insurance, or even active shooter insurance, God forbid.

Your Employees

Once loyal employees can turn into litigious adversaries if you're not careful. So how do you avoid employee lawsuits? Start off with a great corporate culture; hire good people, legally; give your good people great benefits packages; don't discriminate or harass your employees (and don't allow other employees to do it, either); and if you do need to fire someone, do it the right way.

You may not be able to avoid all employer/employee conflict, but minimizing it is the key to a healthy relationship.

Your Customers

Customer lawsuits normally come in two varieties: premises liability if someone is injured on your property, or product liability if someone is injured by your product. Maintaining a safe shopping space can avoid the most common slip-and-fall lawsuits. And making sure your products are designed to be safe, manufactured to meet those specifications, or carry the appropriate warning labels can keep your customers healthy, happy, and out of court.

For advice on setting up your small business to limit legal liability, talk to an experienced small business attorney today.

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