7 Ways to Protect Your Small Business from Lawsuits and Disputes
Building a small business up from nothing is a lot of work. Not only that, but it’s a lot of dreams, and it can be hard to see all your work and dreams destroyed because of a lawsuit or other dispute.
If you are trying to make a small business successful, you should protect it by taking these steps to head off expensive and time-consuming lawsuits and other disputes.
Consult with a Lawyer at Formation
The good news is you can head off many lawsuits and disputes right from the beginning. Consult with a lawyer when you are forming your business about the structure that best suits your situation and goals. At a minimum, a limited liability company (LLC) can protect your personal property from lawsuits directed at the business. Sometimes, though, a corporation is the best structure for getting investors involved, and it can help you avoid disputes by establishing a clear leadership structure and payment schedule for investors.
Your lawyer can also help you lay out important issues like who owns intellectual property that each person brings to the business, and how you determine ownership of intellectual property going forward.
Get Regular Legal Audits
Potential legal issues can come up at any time when you’re operating your business. It’s a good idea to check in with your small business lawyer about the progress of your business to make sure that you have a handle on all the potential legal repercussions of your actions and plans. It’s a good idea to check in at least once a year, but if the conditions of your business are changing fast, you might need to talk more often.
At a minimum, schedule a consultation with your lawyer before you make major changes in the business, such as hiring your first employee, buying commercial property, bringing on a partner or major investor, and more.
Have Your Business Lawyer Review Contracts
In addition to regular legal audits, it’s important to have your business lawyer look at all your contracts before you sign them or ask others to sign them.
Any contract you sign is full of potential grounds for disputes and lawsuits. Letting your lawyer look them over will help you understand what the contract is saying you can be sued for. Then you can decide whether that’s reasonable, and, if it is, make a plan to avoid getting sued for that.
In addition, contracts can be a way to avoid lawsuits. Contracts make expectations clear between you, your business partners, customers, suppliers, employees, and more. This helps avoid disputes caused by people having different expectations about how things should be handled.
Comply with Regulations
Failure to follow regulations can get your company slapped with fines and potentially shut down. It can also lead to lawsuits and other disputes. Failure to build to code, for example, can not only get you in trouble with regulators, but can lead your client to sue you for work that doesn’t meet standards.
We understand that regulations are complicated and understanding which ones apply to your business can be hard. That’s one of the reasons why you should consult with a small business lawyer regularly.
Follow HR Best Practices
Employees are another potential source of disputes and lawsuits. There are many things that can spark disputes with employees, including pay, benefits, hiring, firing, promotions, and more – not to mention the disputes employees have with each other that you can get roped into.
There’s probably no way to completely eliminate these types of lawsuits and disputes. However, following HR best practices can minimize your risks here. Make sure you treat everyone as equitably as possible, and make sure that everyone knows the policies when hired or as soon as you implement them.
Keep Good Records
Another way to head off lawsuits and disputes is by keeping good records. Keeping good records can help you make sure that you are complying with all your obligations to employees, customers, suppliers, and even regulators.
Having good records to reference will also help you avoid disputes. If someone claims that you didn’t fulfill your obligations, you can show them your record of what happened to make it clear that you actually did. Showing people you do business with that you keep careful track of things will make them less likely to try to cheat you, and more likely that you can easily resolve any honest dispute without it turning into a major confrontation.
Likewise, it’s important to keep good records when it comes to dealing with your employees. Keep records of their performance, any praise of them, as well as any complaints about them. Have a record of when you informed them (and potentially reminded them) about any important policies. That way, you can have good support for your actions in terms of promotions, firing, bonuses, and more.
Be a Good Person and Work with Other Good People
It would be naïve to suggest that you can avoid getting sued by being a good person, but the truth is that it can’t hurt. If you treat other people fairly, never try to take advantage of them, and on top of it you are nice to people at the same time, you are less likely to be sued.
If you cheat people, try to cut corners, or try to get more out of a transaction than you are contractually due, people are going to catch on, and then they will come for what they are owed. Being nice also helps – business partners are more likely to let you slide every now and again if there’s some reason why you can’t deliver what you promised.
At the same time, pick your business partners carefully. Do business with people who aren’t constantly looking for a way to hold you over a barrel, and you’re less likely to be sued.
Protect Your Business from Lawsuits
When it comes to avoiding lawsuits and other destructive disputes, a small business lawyer can be your most reliable partner. They can help you understand the potential legal pitfalls of any of your actions, and they can help you avoid them or position yourself for a favorable outcome.
Since 2010, the Law Office of E.C. Lewis has been helping small businesses in and around Denver to navigate the complexities of formation and growth. Elizabeth Lewis is dedicated to developing relationships with her clients and has seen many of them grow from one-person operations into major corporations. Elizabeth is focused on the needs of small businesses, and she can provide the guidance you need to help your business avoid costly lawsuits and disputes.
If you are looking for legal assistance with your small business, please contact the Law Office of E. C. Lewis today to schedule a consultation. We serve clients in Denver and throughout Colorado.