If you own a small business, you may be so focused on building its success that you have not given thought to the possibility of a lawsuit.
Taking precautions now will prepare you and save your budding business if the unexpected should become a reality.
Your personal liability
In a corporation, there is separation between the business owner and the business itself. However, if you are a sole proprietor or own the business with your spouse, a lawsuit could put your personal income and savings at risk. In litigation, the court will examine whether you maintain proper bookkeeping and inventory records. It may allow the individual or company bringing suit to hold you personally liable if, for example, you stand accused of failure to comply with labor or wage laws.
The insurance options
The costs associated with litigation can run into the tens of thousands of dollars, but there are insurance products that can provide reimbursement for what you must pay to resolve the lawsuit as well as your defense costs. These include Commercial General Liability or CGL policies, Employment Practices Liability Insurance or EPLI, Directors and Officers Insurance or D&O, and, of course, workers’ compensation policies.
A trusted advisor
While you cannot prepare for every eventuality, your peace of mind will increase if you develop relationships with trusted professionals, especially in the legal field. Just as an accountant will be essential for your daily business operations, an attorney whose guidance you can rely on will be an essential addition to your advisory team in the event a lawsuit should ever come your way.