Most democratic countries slowly become very inclined towards litigation. This can sometimes become a stumbling block for a business if you do not know how to manage your way around all the potential pitfalls that could land you in court on account of being sued for a loophole in the law that has been exploited.
Let us face it: Most of the time, business owners find themselves in court because they did not do enough homework on how to protect themselves from harm or because they did not know enough to take advantage of the law.
Below are some tips that can help you as a business owner avoid finding yourself in court for one reason or another.
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Make use of good financial instruments and adhere to accounting standards
As a business, one of the most important things you can do is ensure that you keep accurate financial records that are in accordance with your country’s financial standards. One of the biggest issues holding back the observance and maintenance of good financial and accounting records is that transactions are not recorded on time every time.
One way to mitigate this problem is to always ensure that payments are made by check or credit card to allow easier tracking of transactions. You could also use the services of credit card companies to help you set up an online system to manage the transactions on your credit cards.
On the other hand, make sure that you issue receipts for any sales that you make. This way, you will avoid any allegations of financial mismanagement that could land you in court.
Choose a business structure that suits you
Each type of business structure has its purpose, advantages, and disadvantages. It is important to know what the advantages and disadvantages of every business structure are in relation to your particular business.
If you prefer, consult a lawyer before making the appropriate decision. You could choose a sole proprietorship, a partnership, a not-for-profit organization, or one of several different types of company structure.
Ensure that all transactions, agreements, and contracts are in writing and signed or stamped
According to the law, the most ironclad way to ensure that you can prove the terms agreed upon in any business engagement is to have it in writing and signed or accepted by both parties. This can help you prove your side of the story no matter what allegation is made against you or your business.
Avoid too much legalese
If you are going to create legal documents for your business yourself, try to avoid too much legalese. Using too much legalese could open up loopholes that you are not aware of that could be capitalized on by your adversaries. On the other hand, it will be easier to enforce a legal document that is simple and to the point.
Other tips include the following: Make it clear to customers and employees what your business policies are, get insurance, know the law, and avoid any sort of dishonesty.
Get everything in writing.
One of the best ways to avoid potential misunderstandings and subsequent litigation is to put everything into writing, including all agreements and contracts. Whether it is with customers, employees, suppliers, or partners, a clear and defined agreement in writing helps avoid disputes later on. Importantly, your contracts should be complete with all key points, such as payment terms, deadlines, responsibilities, and any other details relevant to the agreement.
It is a convenient affair to seal a deal by simply giving a handshake. Things get pretty dirty and clumsy if things do go wrong. You do not really have the proof of whatever you orally agreed on. Writing your contracts not only protects you but also shows impressively professional and serious attitudes about conducting business.
Closely Follow Employment Laws
Employment disputes are very often the cause of lawsuits for business owners. So, if you do not want to get into trouble, make sure you are following all federal, state, and local employment laws. This includes minimum wage, overtime pay, employee classifications, making sure that the guy who comes in to paint your store is a full-time employee or a contractor, and safety regulations.
Treat employees fairly, train correctly, and maintain a safe workplace to minimize opportunities for lawsuits at work. Add to that an employee handbook detailing company policies, expectations, and procedures. This way, there is a stated guideline for the employee to follow, and therefore, you protect your business if something goes wrong.
Protect Your Intellectual Property
Let us not forget to also pay attention to intellectual property (IP). IP includes trademarks, copyrights, patents, and trade secrets. If your business relies on a brand name or logo, original content, or unique products, you will want to make sure those things are protected so others cannot steal or duplicate them.
On the flip side, avoid the opposite error of stealing someone else’s intellectual property. Using another person’s patented technology, copyrighted material, or trademarked name without the owner’s permission would get you into legal trouble. Conduct very extensive research or seek a lawyer to ensure you are not violating any IP laws unintentionally.
Honest and transparent to customers
Another method of avoiding the courts is to be transparent and honest with your customers. Honesty and the absence of misleading advertising, product descriptions, and marketing materials unveil to the customer exactly what you can offer. Avoid over-claiming and promising results when you have no inkling that you cannot deliver.
Clear return policies and conditions for doing business with you are just as important. It lets customers know exactly what to expect when they do business with you, and they should be able to find that easily. Complaints can become legal action if not addressed promptly and reasonably in case things go wrong.
Keep Good Records
Another way to keep yourself safe is to maintain detailed records of all your business transactions. From receipts, invoices, contracts, employee records, and emails, if kept properly and easily accessed, this documentation can defend your business against many questions related to laws.
Good record keeping can also serve as testimony in your case, providing evidence of what you did right and the steps you took to meet your responsibilities. In contrast, poor record-keeping leaves one very exposed, making it difficult to adequately defend one’s position in court.
Get Insurance
Even with all these measures of prevention, sometimes things do not go according to plan. This is where business insurance comes in. The right business insurance policy may be able to cover incurred lawful fees and settlements in the event that you are sued.
General liability may cover accidents or injuries occurring on your business property, while professional liability covers claims of negligence. More importantly, in manufacturing goods, you will have to purchase product liability insurance. Proper insurance helps avoid a financial disaster for your business if a lawsuit happens.
Conclusion
Running a business is stressful enough by its very nature, so it does not need any legal issues. Taking these preventive measures, contracts in writing, following employment laws, protecting intellectual property, and investing in legal advice reduces the risks of seeing your business ensnared in a lawsuit to nearly zero. Stay proactive, keep things professional, and protect your business from any unnecessary legal hassle.
