Most democratic countries slowly become very inclined towards litigation. This can sometimes become a stumbling block for a business if you need to learn 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.
Make use of good financial instruments and adhere to accounting standards
One of the most important things you can do as a business 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 plans and accounting records is that transactions need to be recorded on time every time.
One way to mitigate this problem is always to 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
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Each type of business structure has its purpose, advantages, and disadvantages. It is important to know the advantages and disadvantages of every business structure 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 your business policies clear to customers and employees.
- Get insurance.
- Know the law.
- Avoid any dishonesty.
Clear and fair employee policies must be adopted.
Employee lawsuits cause most of a business’s legal problems. These include lawsuits over discrimination, wrongful termination, harassment, and even wages. To reduce the risk, the policy has to be clear, transparent, and fair.
- Employee Handbook: You should create an employee handbook that will explain your workplace policies, such as standards of conduct, procedures for presenting complaints, and the steps for dealing with grievances. This handbook will become your reference and protector in case of lawsuits.
- Periodic Training: Provide regular anti-discrimination, harassment, and safety training. Educate each employee, but especially your managers, regarding your workplace policies and what they are responsible for doing.
- Document Everything: You never know when a fight can occur. Paper trails can be the savior that gets you out of one when someone decides to sue you. Keep all employee performance reviews, disciplinary actions, and complaints and conflicts on record. All of these can be hard proof that you acted fairly and in accordance with the law in case of a lawsuit.
Have Proper Business Insurance
Of course, as much as one can prevent it, lawsuits may come. Business insurance, then, plays a crucial role. The right kind of coverage will keep your assets safe and protect your business in case of a legal battle.
- General Liability Insurance: This ensures your business is protected against claims pertaining to bodily injuries, property damages, and advertising injuries that could happen on the premises or through your services or products.
- Professional Liability Insurance: Often known as errors and omissions, or E&O insurance, this cover helps pay claims for errors, neglect, or work that was done with inadequate skill in providing professional services.
- EPLI (Employment Practices Liability Insurance): This policy pays legal fees incurred by wrongful termination, harassment, or discrimination lawsuits filed by employees.
- Product Liability Insurance: If you manufacture or sell products, this type of insurance will protect against claims made due to defects or unsafe products.
Discuss the situation with a knowledgeable insurance agent who can help you determine which policies are best for your business.
Use Written Contracts for Everything
Verbal agreements can hold in a pinch, but written contracts are the gold standard to minimize legal risk. Written agreements clearly state terms and conditions in a relationship and offer proof should a dispute arise.
- Vendor Agreements: Third-party suppliers or service providers should have written contracts indicating the scope of work, payment terms, and assigned responsibilities.
- Client Contracts: While designing a contract with a client, important areas of consideration should be the deliverables, payment schedule, deadlines, and more.
- Non-Disclosure Agreements (NDAs): An NDA secures your business by locking away proprietary information that is shared with third parties.
Work with an attorney to draft standardized contracts for your business and update them periodically if your operations change.
Workplace Safety
A safe workplace isn’t just the right thing to do; it is the law. Workers’ compensation claims, OSHA penalties, and injury lawsuits against the persons who control the premises will follow workplace accidents and injuries.
- Regular Safety Audits: Conduct your workplace regularly to identify and rectify probable risks. This may include checking and cleaning equipment, properly identifying fire exits, and access to first aid kits.
- Employee Training: Train employees on safety procedures, such as those within high-risk industries like construction and manufacturing. Encourage an environment where employees can report hazards or unsafe conditions without fear of retribution.
- Post Signage: Apparent warning signs must be displayed at hazardous locations, and employees must be instructed concerning potential dangers.
Seek a Lawyer Very Early
The best way to avoid a lawsuit is to have a business attorney by your side long before there is a problem. A forward approach to the law is much less expensive than scrambling for a lawyer after a lawsuit has been filed.
- Legal Document Review: Have an attorney review contracts, employee policies, and any other legal papers that may affect your business.
- Consult Attorney for Significant Business Decisions: Make sure you seek legal advice before making major business moves, like merging with another company, making new acquisitions, or entering a new market, so you can be informed of all the risks that may pose to the company.
- Maintain Compliance: Regularly consult your lawyer to ensure that your business is up to date on compliance with new legislation or regulatory changes that might affect its daily operations.
Conclusion
Preventing lawsuits is not only about reacting to problems but about being proactive. Being aware of the legal landscape, having solid policies, and engaging with legal professionals sooner rather than later can reduce your legal risk and keep you focused on what really matters: growing your business. Come prepared, and keep your hard-earned success from unnecessary legal troubles.
