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6 Ways To Protect Your Business From Liability Issues

Liability issues can lead to a costly lawsuit that could ruin your business’s reputation. Lawsuits are stressful and time-consuming. They may also put you out of business, so you need to limit your risk of dealing with liability issues. Several things can be done to protect your business from liability issues.

1. Accurate Record-Keeping and Writing Down All Agreements

Good record keeping can save your business from unnecessary lawsuits. If you have put all agreements you make with different parties in writing, you can easily clarify the duties and rights of each party if you are sued. Hiring an attorney for your business is essential since they can help you draft formal contracts, such as supplier agreements, employment contracts, and sales agreements.

2. Protect Your Business’s Reputation

Businesses thrive on reputation. Having a good name for your business will drive more sales since most people will want to be associated with you. It is crucial to uphold high levels of integrity in all your business transactions. If you make promises, work towards fulfilling them. Misrepresenting your business by not keeping promises on the products or services you offer may lead to general mistrust. Acting with dishonesty can lead to lawsuits.

3. Adopt Good Employment Practices

Learn about different state and federal laws regarding the workplace. Some of these laws deal with discrimination, employees’ rights to privacy, and harassment. Adherence to the employment laws will save you from dealing with legal issues that could arise from the wrongful treatment of your employees.

You should also have employment practices liability insurance policy to cover you in case employees accuse you of engaging in unlawful employment practices. Also, learn about the requirements of specific laws of your business, then develop policies that will ensure you comply with these laws.

4. Hire a Competent Lawyer

Having an experienced lawyer to consult whenever legal issues arise in your business can prevent you from incurring liabilities from legal suits. Hire a competent lawyer who has expertise in different matters associated with the kind of business you run.

Having a reputable lawyer will help you remain in compliance with the law and identify legal issues early before they become more complex. The lawyer’s key role in your business should be to provide legal guidance and constant legal review in all your business operations.

5. Run Your Finances Separately

Most people operating small businesses run them as sole proprietorships. It is one of the easiest ways of setting up a business, and it is cost-effective. However, running your business as a sole proprietorship has a significant disadvantage since you are personally liable for any liabilities your business may incur.

If your business has a lawsuit, you will cater for all the expenses of that lawsuit, including making the necessary payments as directed by the court. You can protect yourself from such issues by registering your company as a limited liability company or a corporation. Changing the structure of your company to a limited liability company will protect your assets from any lawsuits your business may get.

6. Understand Your Insurance Coverage Needs

Being aware of your insurance coverage needs will protect your business from liability risks. General liability insurance covers several risks for small businesses. These risks include property damage, bodily harm from falls or slips, and advertising injury such as copyright infringement when advertising your products.

Commercial auto insurance will protect your employees and business against driving-related liabilities such as accidents and protect your business’s cars from physical damage. You may need to take a specialized insurance coverage depending on the type of business you run. For example, if you run a construction company, you may need contractor bond insurance coverage.

Professional liability insurance can cover businesses that offer professional services if a client sues them for an error or omission when providing their services. You can also get insurance that will give you more financial protection against any unexpected losses your business may incur.

Ensure you contact your insurance provider immediately if you have a claim. Reporting your claims early enough can help resolve the matter quickly and avoid legal tussle that can be costly for the business, consequently ruining your reputation.

Closing Thoughts

Liability issues, in most cases, result in lawsuits, which can be draining for a business. Every business needs to take caution to avoid legal action, as the process is time-consuming and costly. Taking the necessary precautions ensures you do not have to deal with unnecessary liabilities that can affect your business. Being proactive and solving issues early will save you a great deal.

Author information: Tracie Johnson is a New Jersey native and an alum of Penn State University. Tracie is passionate about writing, reading, and living a healthy lifestyle. She feels happiest when around a campfire surrounded by friends, family, and her Dachshund named Rufus.

Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

About This Blog

The title of this blog reflects my attitude toward those government agencies and insurance companies that routinely mistreat injured or disabled people. As a Dallas, Texas lawyer, I've spent more than 45 years trying to help those poor folk, and I have been frustrated daily by the actions of the people on the other side of their claims. (Sorry if I offended you...)

If you find this type of information interesting or helpful, please visit my law firm's main website at You will find many more articles and links. Thank you for your time.

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