Regardless of your industry or niche, your main objective as a small business owner is to improve your products and services and grow your business, so you can increase your profits. However, as you’re chasing after your dreams, you should not lose sight of the dangers that you may face along the way. Many entrepreneurs are so focused on the multitude of tasks they need to handle every day, they become oblivious to the risks they expose themselves to.
Running your own business is certainly more exciting than working for someone else, but it also comes with unique challenges and risks, and legal action against your business is one of them. There are many things that can lead to legal action against a company, including breach of contract, wage disputes, discrimination, inadequate working conditions, accidents and injuries caused by negligence, intellectual property rights infringements, and the list could go on.
Therefore, the threat of getting sued is somewhat of a constant for businesses. Even the most cautious of entrepreneurs can one day have the unpleasant surprise of being hit with a lawsuit. And if you’re a startup or a small company that doesn’t have endless resources to fight back against plaintiffs, a lawsuit can have disastrous consequences for your business, even if you haven’t done anything wrong. This might do more than mess up your plans; it can cause the end of your business endeavours. So, litigation is probably the last thing you’d want to deal with as a small business.
The reality of running a business is that you can't mitigate for every possibility, and sometimes accidents and mistakes happen. That doesn’t mean you are automatically liable. Commenting on workplace accidents, the experts from www.personalinjuryclaimsuk.org.uk said: "To make a claim following a workplace injury, an employee or worker must be able to prove that you owed them a duty of care, you breached this duty and their injuries came about as a direct result of this breach".
The good news is there are various things you can do to significantly reduce the likelihood of being sued and keep your business lawsuit-free. So, here’s what you need to know.
Know the rules and play by them
Since you’re a business owner, not a lawyer, no one expects you to know all the rules and regulations that you must abide by to run a company. However, you do need to have a basic understanding of the general regulations you’ll have to comply with to avoid making many unintentional errors. This includes laws regarding employment and labour, protection of intellectual property, marketing and advertising, taxes and so on.
That’s why it’s recommended you take your time and do the necessary research before you start out. In the end, the more knowledgeable you are, the easier it will be for you to avoid potential blunders and keep your business safe.
Get legal counsel
Although getting educated on legal matters is a must, this doesn’t mean you don’t have to navigate the intricacies of the legal system alone. In fact, it would be reckless to handle all your legal matters on your own. If you want to be sure you’ve done everything right and you haven’t left any legal gaps that can be used against you, consulting a legal professional is the smartest thing to do.
A competent lawyer can provide advice and support on all sorts of legal issues, from basic matters such as incorporating your business or drawing up contract agreements, to more complicated issues like mergers and acquisitions or overseeing trials and hearings. When choosing a lawyer, it’s recommended you choose a professional who is familiar with the legal landscape in your sector and, as needed, specialises in a specific area of the law.
Separate your personal and business finances
Many entrepreneurs start their business as sole traders since this is the easiest and cheapest way to establish a company. However, while operating as a sole trader may provide convenience in the beginning, this can become problematic later on from a legal point of view.
Sole traders have full control over their business assets but are also solely responsible for everything that happens within the company. This means that if your business faces legal issues, you’ll be personally liable and will have to cover the expenses from your own pocket. Since your personal assets aren't separate from your business assets, in the event of debt or bankruptcy, creditors may seize your personal property to recover their money.
Given the risks, it can be advisable to transition or incorporate your business as a limited company from the very beginning. When you register as a limited company, you become a separate legal entity from your business, so your personal assets and finances are protected if your company were to face a lawsuit.
Use written contracts
It’s not uncommon for business owners to use verbal contracts or handshake agreements to seal a deal. However, even though these types of contracts are legally binding, they can lead to unnecessary complications if disagreements arise since they are difficult to prove in court. Therefore, trusting someone’s word is not the best way to do business.
The safer and smarter approach is to have a written contract for everything. These documents clearly lay out the terms that have been agreed upon, so if conditions change or there’s a dispute between parties that ends up in court, you’ll be able to protect your interests and resolve legal matters much easier.
Get insured
No matter how careful you are when running a business, there’s no way you can predict or cover every potential risk. Besides, many lawsuits against companies are frivolous, meaning they have no legal grounds. Luckily, for all the legal events and aspects that you can’t control, there’s liability insurance to help you out.
General liability insurance covers a wide variety of legal risks helping to ensure the business is completely protected against unforeseen situations. You should discuss your insurance options with your lawyer and insurance broker and choose a policy that best suits your business needs.
Sometimes, legal issues are difficult to avoid, but if you take the necessary measures, you’re less likely to set foot in court.
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