So, You’re being Sued: How to Protect your Small Business from a Lawsuit

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As a small business, there is always a chance that someone will bring a lawsuit against your company. Even if you are avoiding lawsuits at all costs, there are still some things you cannot control. However, the good news is that there are steps you can take to prevent getting sued in the first place and to survive, should you face a lawsuit.

Prevention is the best cure

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As with most things in life, an ounce of prevention is worth a pound of cure, which also applies to being sued as a business. There are some measures you can take to prevent lawsuits against your small business. They will also help your company stay organized and ordered, which will prove useful should you decide to expand.

Insurance is vital

Lawsuits can be time-consuming, challenging, and extremely expensive – that is why small businesses need to ensure that they have the right kind of insurance cover. Although having insurance will not guarantee that your company won’t be sued, it will help cover the associated legal and liability costs.

Companies like Next Insurance help small business owners find the right type of insurance and insurance plan for their company’s unique needs. There are different insurance types with varying protection levels to choose from, including general liability insurance and more specific errors and omissions insurance. It is worth doing your research and finding the right kind of insurance for your needs.

Stay organized

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As with all areas of management, proper organization and record-keeping can prove extremely beneficial both to prevent being sued and to defend yourself if it happens. The records should include accurate information about transactions, along with communication such as phone calls, emails, and letters.

Consistent, accurate records of negotiations, communication, and transactions are good for keeping track of business, but they are also a strong defense in the face of a lawsuit.

Rely on legal contracts

No matter how small your business, it is vital to use legal contracts drawn up by a lawyer for transactions with other companies or entities. Disputes can arise, and having legal documents and contracts which clearly define the services or goods exchanged will serve you well in the event of a lawsuit.

Consider incorporation

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You never know what could happen or what kind of claims could be brought against you, and this is why incorporation should be considered. Depending on the severity of the lawsuit, the settlement can be collected against your bank account or home if you lose the case. By incorporating the company, anyone who wants to sue can only do so for the assets associated explicitly with your company – rather than your personal assets.

Create and follow company policies

Drafting and implementing company policies is vitally important for small businesses and can save you from a lawsuit. Create a comprehensive employee manual with information about the company procedures, workplace policies, and role expectations and ensure that each newly-hired employee is given a manual to review.

Invest in customer care

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Good quality customer care should be prioritized by all companies. Sometimes a customer might just be upset or confused by a situation or interaction with the company. Good quality customer service can resolve such problems and prevent lawsuits by calming down the customer and explaining the situation. It is worth investing time and training into your customer care representative or team to help them learn how to handle difficult queries.

Act with ethics

Although this may seem obvious, it is essential to build a company with a culture rooted in honesty, morals, and ethics. It is vital to develop a company that values following the law above making an additional profit. Doing so will help it establish a reputation for integrity in the community. It is also essential that all employees, customers, and visitors to the workplace are treated professionally. The company must have a policy of enforcing professional, respectful behavior at all times.

Hire a business attorney

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You cannot control everything that happens, and if you are being sued, it is important to review the case closely with a lawyer. They will know what information to look for, and they may quickly identify weaknesses in the plaintiff’s claim.

While it may be tempting to contact the complainant and try to resolve the conflict yourself, it is essential to not communicate directly with the plaintiff while the lawsuit is ongoing. Instead, direct communication through the attorney you are working with is advisable. That is because anything you say to the plaintiff about the case can be used against you.

Get in touch with your insurance provider

Once you have been sued, you should check your insurance policy and contact your insurance provider so that you can let them know about the potential lawsuit. Your insurance provider will clarify what your insurance covers regarding legal fees and costs, and explain how the process will work on their end – it is important not to assume that you have coverage for the lawsuit, as you may not have the specific kind of coverage you need.

Decide how you want to proceed

Typically, when you are subject to a lawsuit, there will be a deadline to submit a response in writing. You can make some choices regarding the complaint’s resolution, so it is essential to discuss all of your options with your business attorney before deciding how to proceed. You must respond in some way, as ignoring the complaint is not an option.
If you fail to respond to the complaint within the stated deadline, the plaintiff will be given the right to file a Request for Default, which means that they will win the case, no matter what judgment the court makes.

These are just a few ways to prevent lawsuits and how to respond when your small business is facing such an event. It is important always to check the specific regulations, laws, and deadline periods in your home state – this is something that your business attorney will be able to help you with.

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