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How To Prevent Legal Action Being Taken Against You As A Small Business Owner

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How To Prevent Legal Action Being Taken Against You As A Small Business Owner
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Are you a small business owner? Here are 8 things you should pay attention to in order to prevent legal action being taken against you.

Small business owners worry with cause. There’s much for small business owners to fear outside their doors. Every time a small business hangs out its shingle and opens its doors, it allows risk to enter. b

Small business owners pay out millions of dollars each year in legal costs and settlements. On the average, for every million a business earns, it will pay $20,000 out of pocket to defend against legal actions.

James E. Gallagher, writing in SmallBizDaily, says, “The reality is that most business owners will be involved in at least one lawsuit during their career, or during the lifetime of the business.” Yet, most of those business owners admit they are not prepared to fight back.

Loss prevention takes time and energy, of course. And, for small business owners, time and energy mean money lost. Most are not able or willing to set money aside as a sunk cost in case of litigation. But, there are things a small business should pay attention to if you want to prevent adverse legal action.

 

8 Things You Should Pay Attention to in Order to Prevent Legal Action Being Taken Against You

A small business owner must pay attention to threats at all levels coming from all directions. As threatening and confusing as that may be, owners must accept the potential as a matter of business life. What you must also understand is these threat are something that can and should be managed.

1. Risk Management

You need a risk management strategy and plan despite the fact you can’t staff up with a full-time Risk Manager. There are templates for risk management plans online which you can customize for your business.

But, in making risk management a strategic policy and plan in the business culture, sharing information with employees, monitoring safety practices, and building a consensus among staff regarding the values in risk management are crucial.

2. Identify Risk Potential

You must, of course, take safety precautions to prevent injuries for employees and customers. You must take every reasonable effort to reduce risk in advance.

But, you must also consider the risk presented by the product or service at the center of your business. Even if your quality control is up to eliminating the risk, you need insurance to cover that liability.

3. Insure Fully

Small business owners suffer heavy insurance overhead, but full protection is vital to reducing or avoiding losses. You expect to purchase comprehensive property insurance and liability insurance.

But, in addition to those basics, you must have workers’ comp insurance and insurance coverages specific to your business. For example, if you are in the food processing or alcohol serving business, you have additional liabilities.

4. Comply with Employee Law

Small business owners wrestle with employee complaints and legal action, some of which drag on, add costs, and disturb the working staff.

However, compliance is complex, distracting, and data focused. There are federal, state, and local rules affecting hiring, firing, and employee relations.

Only the smallest family-owned business enjoy any relief from these rules, but if you link compliance practices with the best employee management processes, you can reduce the risk.

As Entrepreneur Magazine says, “If you want to protect yourself against the possibility of a legal mishap, you’ll want to know what you might be up against and try to prepare for the worst-case scenario the same way you would for a natural disaster.”

5. Honor Your Contracts

How Business Owners Can Prevent Legal Action Against Them

A small business makes contracts with vendors, providers, and customers. And, contracts are socially and legally binding.

You may deserve the legal action if you knowingly violate the terms of the contracts. Your best defense against unwanted legal action is to honor your contracts. Having said that, it doesn’t mean you can’t make mistakes or misunderstand the contract terms.

6. Be True to Yourself

Some business owners are guilty of fraud, often using another businesses or individual’s ideas, patents, or other intellectual property.

If you use another firm’s or individual’s intellectual property or trade secrets, you could be held legally accountable for any profits and damages. Not all actions are necessarily malicious or even deliberate. But, if your ethics slip enough to co-opt a competitor’s customer list, you could be in trouble.

7. Retain Legal Advice

Every small business needs professional legal advice from the start. You need professional help with business planning, financing, contracts, and more.

But, legal advice cannot be a once-and-done event. The business needs sustained input on loss prevention and readiness when litigation threats arise. Brady and Associates, for example, understand how business litigation and potential litigation affect Kansas and Missouri employers and employees. They have helped a lot of small business owners in Kansas and Missouri

8. Beware the Shakedown

Frivolous lawsuits accumulate yearly, costing small businesses billions in lost time and settlements. Rich Mintzer, a contributor to Entrepreneur.com, notes, “Although dealing with a frivolous lawsuit can be pricey for entrepreneurs in terms of both time and money, the bigger problem that arises from the many shakedown lawsuits that have hit the courts in greater numbers recently is that these lawsuits affect all small-business owners in the form of higher insurance rates.”

Frivolous lawsuits can come from any direction, a fear in itself. But, comprehensive and firm best business and accounting practices in your business will deter shakedowns that waste your time and money.

Are You a Small Business Owner?

Small business owners worry that their work and investment is at risk as soon as they open their business doors. But, they need to understand more than worry. They need to understand where the threats come from. They must understand the degree of this threat, how to respond to it and when to react.

Their first priority lies in identifying what they must do to deter, reduce, or avoid these legal action, whether they come from inside or outside. They must be ready to learn how to save a company from being sued by employees.

There is so much they can do in terms of hiring well, serving vendors and customers well, and honoring their contracts. But, the strongest position lies in running their business honestly and ethically, a commitment they must conscientiously sustain.

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