As a business owner, it’s essential that you do everything in your power to make sure that your business runs smoothly at all times and limit your exposure to risk. Litigation is one of those things that could end up eating into your bottom line and affecting the productivity of your business. But what can you doreduce the chances of being prosecuted? Here are a few ways you can protect your business from lawsuits.

Watch What You and Your Employees Do and Say

Owners and employees should be mindful at all times of the things they say when interacting with the public. You have to make sure that none of your employees is engaging in business practices that might be seen as questionable. 

You should do everything in you can to make sure that you do not release statements that might be interpreted as slanderous or libelous. And you should avoid doing business with questionable individuals or organizations. While your business might have a strict code of ethics, working for people who are known for bad business practices could end up rubbing off on you if they get prosecuted.

You should also make sure that you are never implicated in any conflict of interest. Conflicts of interests will not only make you and your business look bad but could also open you up to legal action. 

Make Sure You Keep a Good Attorney on the Payroll

The first thing anybody should do when they start a businessis to lookfor a good attorney. A good lawyer will be able to advise you before you make decisions and give you advice in case you happen to get prosecuted. They’ll also be able to foresee possible issues that could lead to legal action as well.

Try to work with an attorney who’s familiar with your business. Also, if you’re working in a heavily regulated industry with a complex tax system, you should consider hiring a tax attorney as well. They’ll be able to help you avoid issues with the IRS or any state taxation department.

Finding a good attorney is pretty simple if you take the time to do the legwork. Cold calling is one way to go, but it’s always better if you get references from other business owners first. You could also check with your local bar association as well as professional organizations they might be a part of, like your chamber of commerce, for instance.

Make Sure that There’s a Degree of Separation Between You and the Business

Way too many entrepreneurs are still operating their business as a sole proprietorship. While it’s by far the simplest business structure out there, it is also the most dangerous from a personal standpoint. With sole proprietorships, there is no separation between your personal assets and business assets. This means that if you have to deal with any prosecution, your personal assets could end up being seized.

At the very least, you should consider setting up a trust to becomethe owner of your business. Trusts are legal entities that can own various assets, like real estate, securities, andbusinesses, and file their own returns. When your business is part of a trust, the only assets that can be reached are usually those that are under the trust. 

Incorporating is another solution. However, corporations do come with their own specifications and tax requirements. But your personal assets will be completely separate from the business.

Get the Proper Coverage

Getting the proper insurance coverage is absolutely essential if you want to limit the chances of being prosecuted. At the most basic level, your business should at least have liability insurance for small business. General liability business insurance, also known as business liability insurance, will protect you from a wide variety of accidents. 

For instance, general liability insurance will protect you if one of your clients ends up being injured while you’re doing some contractor work on their residence. Liability business insurance will also protect you if you end up damaging a space you were renting. These accidents could easily put you out of business and are much more common than many people realize. Doing something as simple as signing up for general liability coverage will allow you to do your work without having to worry about prosecution in case you make a mistake.

Also, if you happen to be a consultant, for instance, you might want to sign up for errors and omissions insurance as well. This will protect you in case one of your clients accuses you of making errors, omitting important information or not respecting the terms of a contract.


Being prosecutedis something no business owner wants to deal with. If you follow the few tips in this article, you should significantly reduce your chances of dealing with legal action.


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