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Protecting Your Asset: How to Stay Safe from Business Lawsuits


American citizens file 40 million lawsuits every year. That massive number makes the USA one of the most litigious societies on the face of the planet.

If you’re a business owner, that fact should scare you.


Because while suing people personally can reap some benefits for plaintiffs, many people that are sue-happy think that suing a business can equal a much bigger payday.

To ensure that you and your business can stay safe when business lawsuits rear their head, you have to be prepared. Below, we talk you through 7 things that you can do to stay legally proactive.

1. Have a Legal Consultant

Everything you do as a business owner could land you on the wrong side of a lawsuit. Per that fact, it’s important that you know somebody that can offer you their legal opinion when needed.

That person should be a qualified attorney.

We appreciate that when you hear the word attorney, you might be thinking that you can’t afford legal counsel right now. Hiring an attorney to give you a few minutes of advice when making big decisions vs hiring an attorney to represent you in court carry two very different price tags though.

If you can use a lawyer for guidance every now and then, you’ll end up spending a lot less on their services then if you make a mistake, get sued and then need to hire them to fight a legal battle.

2. Spell Everything out for Employees

One of the most common places that business lawsuits come from is employees. This might come as a surprise to business owners that have a great relationship with their team.

The truth is, all it takes is one slip-up and an employee that could use extra money to turn a friend into a plaintiff in a case against you.

Avoid giving your employees legal fuel by ensuring that A) You always see them as employees first and as friends second and B) You always spell out your company policies in writing.

If you don’t have an employee hand/policy book that you give out to new people when they’re on-boarded, get one created.

Having written documents that spell out expectations could save you thousands in legal fees later.

3. Get Insurance

No matter how hard you try to avoid a business lawsuit, chances are you’ll eventually run into one. When you do, a little bit of insurance goes a long way.

They sell insurance for just about everything today. You can buy policies for employee injuries, faulty products, negligence and a number of other things that you might get sued for.

Our advice is to talk to a legal consultant and opt into as many policies as they see fit.

4. Make Cyber Security a Priority

One of the most overlooked areas where businesses can run into legal issues is online. Even big companies with sophisticated protections fall victim to cyber attacks all the time and end up having to pay millions in damages.

If paying millions in damages isn’t something that you feel like you could afford, you’ll want to make sure that your company is not being negligent as they create and manage data.

A good cyber security consultant can make sure that your network is secure and that you’re taking the best steps to avoid a cyber attack. Cybersecurity teams can also help you manage active breaches to minimize fallout.

In case you’re interested, many insurance providers sell insurance for cyber attacks that could prove life-saving if your customer’s data gets accessed by a bad actor.

5. Get Everything in Writing

When you’re doing work for customers, coming to agreements with contractors or striking any sort of deal, always get it in writing.

We get that it can be tempting to simplify things by working on handshake agreements. The problem is though, handshakes don’t hold up in court and if you get sued for something that you can’t prove a defense for, you could end up losing a lot of money.

All contracts should be reviewed by a legal professional to ensure that you’ve built proper protections into them for your organization.

6. Always Operate Ethically

The best way to avoid 95% of all lawsuits is to operate ethically. That basically means that you should never try to do things that you know take advantage of people or that you know will cause you trouble if you get caught.

While there are some lawsuits filed by people that are just digging for easy money, most lawsuits that end up winning are ones that are backed by merit and frustration.

Don’t give your customers/clients/anybody else reason to sue you and if somebody is mad about how you handled something, make things right.

That golden rule goes a long way.

7. Incorporate

If you’re a sole proprietor, we recommend incorporating your business. Doing so will allow you to separate your personal assets from your business assets.

If a sole-proprietor gets hit with a business lawsuit, they stand to lose their house, car, etc. With incorporation protection, the person being sued can only lose assets that belong to their company.

Companies like Corporate Direct and other incorporation focused firms can walk you through the process of incorporating your company, fast.

Wrapping Up How to Stay Safe from Business Lawsuits

Business lawsuits occur more frequently than you probably think they do. To ensure that you getting hit with a lawsuit doesn’t spell the end of your company, follow our advice above and get protected!

For more business and legal guidance, feel free to browse more of the content that we publish weekly to our website.

So, what do you think ?