How to Keep Your Business from Being Sued

As a small business owner, the last thing you want is to be sued by a customer, a competitor or any other party. Unfortunately, you don’t always have control over the actions of others. Whether it is due to a mistake made by your company, a misunderstanding or just plain greed, there is always the possibility that your business could be sued. And while having proper business insurance coverage will help you cover the costs of lawsuits, it is still better to prevent them from happening in the first place. By implementing the right practices and precautions, you can significantly reduce the chances of being sued and all the frustrations and expenses that come with it.

5 Ways Your Business Can Avoid a Lawsuit

1. Know the laws that apply to your business.

You are not an attorney and no one expects you to be – however, you need to know that not being aware of the law is not a valid excuse for breaking it. If your business breaks the law you can expect to be held accountable for it. Ignorance is not a useful excuse in court.

The consequences of breaking the law can be extremely expensive – enough to break a new up and coming business. That is why it is always a good idea to consult an attorney that is knowledgeable about your area of business, especially before you make any major decisions. It is worth talking to a lawyer when you establish your business, like learning how employment law applies to your company, and it is smart to talk with a lawyer again before you make significant changes to how you do things.

The cost of consulting an attorney is well worth it if paying a professional keeps you from making costly mistakes.

2. Keep your standards high when it comes to safety and health regulations.

The regulations that apply to your type of business are there for a reason. They are important not only because they protect the public and employees, but also because they protect your business from lawsuits. Businesses that break major safety and/or health regulations are some of the easiest to sue because the mistakes are so obvious and negligent. All the opposing legal team has to do is provide evidence that you broke established safety or health regulations and your actions caused someone serious harm to win a lawsuit against you.

There are certainly some regulations that can seem tedious and unnecessary – every industry will tell you the same story. However, it is in your best interest to strive to meet them anyway, simply because it protects your company from being sued.

3. Be extremely careful to avoid harassment and discrimination.

Harassment and discrimination claims can devastate a small business. Sometimes, the owners of small businesses do not even understand that they are running afoul of the law in these areas – you don’t want to be this type of business owner. As noted above, being ignorant of the law does not protect you from lawsuits.

Learn harassment and discrimination laws and how they apply to your business. It might be worth consulting an attorney if you are not sure. It is often the ones at the top of a business, like the owners or managers, who are the ones found responsible for harassment and discrimination. You want to avoid finding yourself in a similar position so put in the time to learn how to protect yourself and your business.

You need to have ongoing discussions with your management team about these subjects as well. While you may be able to meet your minimum legal requirements by posting the right signs and updating your employee handbook, only real-life discussions with your leadership team will cut off potential problems before they become major issues.

4. Make sure your contracts are well-written and legally binding.

Contracts are one of the major building blocks of the business world. They provide consistency and predictability because they make agreements relatively reliable. But they only work if they are written correctly and adhere to existing law. You have probably seen options for online contract templates that you can use for all sorts of things in your business – and there are situations where such contracts can be sufficient. But if you are making an agreement that really matters to your business, it is probably worth consulting an attorney to make certain that the document you sign is what you think it is.

A similar point can be made about signing contracts presented to you by others. Before you sign such documents, consult with your attorney. Contract language can be dense and difficult to understand – which is why it is so easy to enter into an agreement that you didn’t understand. You will be much safer from deception if you have an expert read your contracts before you sign them.

5. Do the best job you can for your customers.

Your hard work and effort will not always protect you from lawsuits. The truth is, you don’t have to do anything wrong to be sued. Someone can just make up an offense and bring a lawsuit against you. However, you do have to make a mistake for you to lose a lawsuit in most cases. The court has to determine that you failed in your duty in some way and/or were negligent for you to lose a lawsuit – so the best way to avoid such situations is to do the best job you can, every time.

No one is perfect and you shouldn’t set impossibly high standards for yourself or your employees. But you can create a company culture that takes pride in doing good work and taking care of the customer. You can set an example for your employees that demonstrates what it is to deliver good customer service and build the best possible reputation. That way, even if you are sued, you are likely to avoid losing the lawsuit due to poor quality work. 

2 thoughts on “How to Keep Your Business from Being Sued”

  1. Thanks for the information, Klaus. You have touched a very important issue there. Most of us do not take note of the full legal implications of our business activities. It is even more so for small businesses. Rightly said, this may prove too costly as time goes on.
    I am in internet marketing for small businesses in my area, and I mostly use ready-made contracts. I have been having this feeling that I need to have a lawyer to draft my own contracts sooner or later. After reading this, I feel it needs to be very soon!


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