If you are a business owner, the time may come when you face a lawsuit.
If litigation is in the offing, your personal liability, as well as the fate of your business, may be at stake. However, you can take steps to put a protection plan in place.
Understand your liability
Small business owners without a corporate structure are open to personal liability if litigation arises. The court will determine whether you maintain proper records, file proper tax returns and follow “corporate form” in general. Depending on the basis for the lawsuit, the court may allow the opposing party to hold you personally liable, putting everything you own at risk.
Consider insurance options
Various kinds of insurance offer protection for you and your business. These include Employment Practices Liability Insurance, Directors and Officers Insurance, Environmental Insurance, Commercial General Liability Insurance, and, of course, your worker’s compensation policy.
Implement a litigation hold
If you discover that a lawsuit is imminent, be sure to implement an immediate litigation hold. Identify the whereabouts of both digital and hardcopy information that likely relates to the lawsuit and secure it. If the court finds that you have lost or discarded pertinent information, you could incur stiff penalties.
Develop professional relationships
You can rely on a team of professionals to step up if a lawsuit threatens. If you own a small business, you may not keep an attorney, accountant or financial advisor on staff. However, it is a good idea to develop professional relationships over time that could help keep your day-to-day operations running smoothly and help protect you and your business if a lawsuit threatens.