Protect Your Business from Risks of Lawsuits Fact: We live in a litigious society and most lawsuits arise out of a business relationship, not from the threat of a personal injury lawsuit. Every business faces the risks of becoming involved in a lawsuit. Business owners can help minimize the risks by taking some protective measures. Here are some suggestions we offer our business clients on a regular basis. Shield Yourself from Personal Liability Exposure Some lawyers advise that every business should be incorporated or formed as some other type of limited liability business entity. While incorporating is no guarantee against personal liability exposure, it's certainly an effective shield against the risks and dangers inherent in operating a business. Every business owner should be mindful of the risks and take steps to protect their family and their personal assets. Always Get it in Writing Whether you are providing services, hiring a vendor, hiring an employee, or selling product, get in writing. The most likely kind of claim against your business will be over a contract of some sort. Every transaction - buying, selling renting, or providing services involve written contracts - involves legal relationships. If you enter into business dealings without a written contract, you are placing your business at risk. You can minimize the risks in your favor by using contracts that contain terms that favor you. The protections are contained in the fine print. Every agreement should spell out how disputes between the parties to the contract will be settled. For example, arbitration and mediation clauses keep you out of the courts and liquidated damages spell out the amount to be paid by a breaching party. You can also add provisions limiting your warranties and spelling out penalties for late payment. Partnership and Shareholders' Agreements Do not take your business relationships for granted. It is essential that when there is more than one owner of a business, the relationship between the owners must be defined. Consider it a prenuptial agreement for business owners. Whatever you call it, the ownership relationship should be spelled out in writing. The Four Most Common Ways to Get Sued by an Employee The four most common kinds of claims by employees are for wrongful discharge, claims for unpaid leave and overtime, defamation, and discrimination and sexual harassment. Many such claims can be avoided by a detailed employee policy manual and being careful in how you deal with employees. To reduce the chances of getting sued, it also helps to have well-drafted policies and procedures in place. Every employer, for example, should consider having an employee handbook that outlines what is expected of employees in the workplace. Protect Your Business Trade Secrets and Customers You may want to have contracts with key employees that prevent them from taking your business away from you. This can be done any number of ways, but the important thing is to start treating your business trade secrets as trade secrets. This can be done by written contracts with your employees or making sure that your business secrets are not kept out in the open for everyone to see. There are several proactive steps to take to accomplish this. Insurance Having the right insurance in place is a must when trying to protect you and your business if you are sued. An insurer has an obligation to defend you on claims where there is a potential for coverage under the policy. This means that, regardless of the outcome on a lawsuit, your insurance company must hire and pay for a lawyer to represent your interests in the litigation and to pay any damages sustained by the other party. Get A Lawyer Just like auto mechanics, lawyers are fond of saying, "Pay me now or pay me later." You could end up being your own worst enemy if you're drafting your own contracts and doing business deals without legal advice. Well-drafted documents help to prevent lawsuits and, in the long run, save countless dollars that may otherwise be spend in defending a lawsuit. There is a secret formula for protecting your business from lawsuits. You are also in a much better position to defend a lawsuit if you already have a continuing relationship with a lawyer or a law firm. Once you have been sued, the clock is running and you have only a short time in which to respond (usually 30 days or less). This is not the time when you want to have to go out and beat the streets to try to find a lawyer to represent you. At Bellas and Wachowski we have developed a unique system for helping business owners at every step in their business development and expansion. We call it our Corporate Maintenance Plan and LLC Maintenance Plan. For a modest annual fee we will help preserve your business' legal status and provide you with unlimited telephone access to us to answer your legal questions immediately. | 
