7 Preventive Measures Your Business Can Take to Avoid a Lawsuit

Running a business is a daily challenge. While this is true, it’s also an exciting process that can also lead to significant profits. Unfortunately, providing services to others also opens an individual up to the possibility of a lawsuit.

Lawsuits are often time-consuming, emotionally draining, and expensive for everyone involved. While there is the protection offered by insurance from providers such as scottiinsurance.com, there are other steps business owners should take to protect themselves. Keep reading to learn what those steps are.

1. Incorporate the Business

An obvious suggestion to all business owners is to avoid the possibility of a lawsuit at all costs. Unfortunately, not all situations or issues that lead to a lawsuit can be prevented. For example, if a worker is injured while on the job, the owner may be sued and required to pay the worker’s lost wages.

If the employee is successful, they can collect against the business owner’s home, bank accounts, and any other assets the individual has. A good way to prevent this is by incorporating a business, which separates liability from an individual and business. What this means is that, with a corporation, the person suing can only pursue business assets, not personal ones.

2. Get Protection from Insurance

Insuring a business isn’t going to keep a business owner from being sued, but it may separate business and personal finances from the potential financial strains caused by a lawsuit. An insurance company will help the business cover any liability costs and legal fees that are incurred due to this lawsuit.

Make sure to understand the liability policies offered before purchasing one. Usually, business owners choose general liability coverage that protects from general lawsuits, but there are other options too. For example, errors and omissions insurance provides protection from mistakes made in the course of a project.

If a business owner is unsure about the type of insurance needed, they can work with the professionals who can provide more insight and guidance. Getting the right coverage will ensure protection regardless of the situation.

3. Use Legal Contracts

Businesses of any size need to use legal contracts that are drafted by a lawyer when dealing with another company or person. This is a rule that applies to all businesses because the contract can protect the business owner’s interests if a lawsuit is filed.

Make sure to define the services being offered to customers to reduce the possibility of a legal dispute in the future. With the proper legal documentation in place, the expectations for each party will be outlined in a binding agreement.

4. Maintain Accurate Records

A reputable business always makes it standard practice to maintain records. The process includes recording the date and time an agreement is signed and all items that are discussed at each meeting. All communication, including emails, phone conversations, and transactions, are also documented. There are some businesses that will limit record-taking to just with a problem occurs that will impact the completion of a project.

It’s important for businesses to ensure records state what services are agreed on with every customer in case a lawsuit is filed. The details may include the services or products discussed during the negotiation process. Remember, with consistent record keeping, a business owner can have a proper defense if a lawsuit is filed.

5. Create and Follow Company Policies and Procedures

Another crucial step to protect a business is to draft workplace policies and procedures. This is an effective step that can help prevent lawsuits. Be sure to instruct staff members to follow the policies because doing so is vital for protecting the business.

A good option is to create and provide an employee handbook or manual to each worker. This will ensure that employees have the information to know how to properly perform their jobs and reduce the risk of lawsuits and other undesirable outcomes.

6. Be Moral, Honest, and Ethical at All Times

It’s crucial that business owners work to be ethical in practices each day to build a good reputation in the community. The end goal should be that no client, dollar amount, or transaction is worth putting the business’s place in the market at risk by bending the rules.

Be sure to act in a professional manner every time customers are dealt with. Also ensure the employees know how to do so, as well, to prevent the potential of a lawsuit.

7. Offer Superior Customer Service

A good way for business owners to avoid being sued is by providing good customer service with all interactions. In some situations, customers may be upset about something small, and good customer service will make a huge difference in helping them calm down or having to deal with a possible lawsuit.

It’s important for all staff members of a business be trained and ready to explain that mistakes and issues are unintentional, but they can still happen. With the proper training, employees and managers can help to prevent the possibility of a lawsuit.

Is a Business Protected?

Business owners need to carefully review the processes they use to ensure they are adequately protected from the threat of a lawsuit. If the business is not protected, now is the time to implement new strategies to help mitigate this risk. Remember, a single lawsuit can be devastating, especially for a small business. There are many instances of this situation where a business was never able to reopen after dealing with a lawsuit filed by a customer or employee.

By using the information here, a business owner can feel confident they are prepared for legal issues if they arise. Remember, though, as a business changes, the level of protection they have in place should change too. Failure to do this can lead to devastating consequences, as mentioned above. For business owners who aren’t sure how to get started and to ensure the right processes are put in place, review the information here again. It is applicable to virtually any business, regardless of size or industry. Protecting a business shouldn’t be something that is overlooked or pushed to the side and is a crucial part of making sure the business remains alert and successful.