The best protection against being sued in business is to use common sense, practice honest business ethics, resolve complaints as quickly as possible, and follow our 10 Tips on How Not to Get Sued.
Establish a form of business the offers the most protection against personal and financial liability risks. Sole proprietorships are most commonly formed by women business owners but this form of business leaves business owners open to the greatest legal risks.
Put every business transaction possible in writing. This includes agreements, contracts, and financial transaction. If you do not have a solid background in legal work, have an attorney review your legal documents. If you have any hesitation, get a second legal opinion.
Legal documents should be written in terms that can be easily understood. Legalese does not offer you any more protection than simple English. In fact, a contract that is beyond the reasonable comprehension of the average person may be more difficult to enforce than one that is full of legal terminology only an attorney could decipher.
Clearly, and again, in plain English post and report your company’s disclaimers and business practices for refunds and returns. If you want customers to be happy, you have the responsibility of ensuring that they understand in advance your policies. If information is hidden, too long, or impossible to read either because of complex wording or using small print fonts, it is not helping your business image and may not even offer you the protection you need.
Keep accurate financial records. Corporations and large businesses should voluntarily hire an independent auditor every few years. Do not want to get question by any legal authorities, or by an individual in court claiming financial mismanagement – you may end up having your accounts frozen until you can prove otherwise.
Get business liability insurance! Insurance is expensive, and can be difficult for some businesses (especially sole proprietorships) to obtain. But without it, you expose yourself to the most legal risk. A good insurance policy will provide coverage that will offer legal defense if you are sued, and have not broken the law. The longer you wait to apply for insurance, the harder it will be to get it.
Obtain the right licenses, permits, and registrations. File taxes, permits, registrations, and any other required financial or legal documents that need to be updated or renewed, on time.
Work to resolve customer, employee, and other business complaints as quickly as possible. Never ignore a complaint or concern. It is very easy for people to make allegations, and in many cases, even to file a small claims or other lawsuit against you. Anytime to fail to take immediate action to resolve complaints you run the risk of being sued.
Don’t do anything illegal or unethical. Sounds simple, but if you do not take time to know federal and state laws that govern your business, you could easily break them. Ignorance is not a defense.
Never assume you can “get away” with breaking the law. Strive, in all your business practices to know and obey the law. If you are sued, you will be glad you did not cut legal corners.