Key Tips On How To Help Prevent Business Litigation

business risk management

All businesses are required to acknowledge the importance of avoiding litigation. All the hard work you’ve done for your business could be for nothing once you get into a business dispute. Business litigations are incredibly troublesome to all companies. Aside from being so costly, litigations can also affect your most important tangible asset, your business reputation.

So to help you out, below are some key tips for businesses to protect them from risks and lessen the odds of litigation.

1. Structure your business to shield your important assets

Business owners should choose a business structure where their important assets will not be at risk in case it goes down.

  • Sole proprietorships are one of the structures where a business owner’s important assets are at risk to business creditors. This type of structure may be the right one to choose during the business formation, but it will be less effective for the business as it grows.
  • You can instead try to structure your business a step further by creating several entities. Structuring your business into several entities can help avoid liability of the main company, shareholders, members, or partners.

2. All business agreements should be put in paper and should be drafted by an attorney.

All business agreements should be written in a contract prepared by an attorney. Having a business litigation lawyer is crucial to protect you from disputes. One of the main reasons why a business can face litigation is its failure to live up to its obligations and duties of an agreement on paper. A business agreement will never be considered as formal unless it was written on paper.

There are a couple of things to remember though before signing business agreements.

  • You must first read and understand the details of a business agreement or contract before signing it.
  • Always ask for clarification on points in the contract that you are unsure of.
  • Don’t sign the contract yet if there’s still further negotiation to be made.

3. Keep good records

Many business disputes could have been avoided if only the necessary documents were produced.

  • Keep a good record of all business contracts or agreements.
  • Keep a good record of any business conversations and telephone calls as well.
  • Be sure that these important documents have a soft and hard copy.

4. Make sure that your business carries insurance coverage that’s appropriate for it.

It’s not the question of how much money your business is entitled to, but it’s all about the type of insurance coverage that you have for your business. Be sure that the insurance coverage is appropriate for the business risks you may be facing.

Remember that as your business grows, it may need additional types of insurance. Make sure that your business has up-to-date insurance coverage.

5. Train and manage your staff properly

Be sure to give your staff proper training before they can start working for you. Explain to them the business and employment policies you want to be observed.

Conduct frequent employment reviews and be prepared to terminate an employee whose performance and conduct could subject your business to a lawsuit.

6. Solve disputes before they can escalate into something bigger

Most businesses litigations can be avoided if only the business were able to solve the dispute earlier. As a business owner, you need to set your foot in between arguments before they can escalate into litigation. Communicate with the parties involved and diffuse the situation proactively.

Also, don’t ignore any disputes that may arise.

7. Be smart with your business relationships

This tip is essential especially for new businesses who are still looking for new clients or a potential partner. The temptation to take on any client or business partner is big, but there’s a danger lying behind it though. You need to be smart in choosing who you do business with.

There’s nothing wrong with knowing a little more about a new client, a potential partner, or an important vendor before you start doing business with them.

8. Create a working environment that’s free from harassment and discrimination

Your business’s success also depends on your employees’ performance. But for that to happen, your employees must enjoy a working environment where they are free from any form of discrimination and harassment.

  • You don’t want your employees to be bullied or harassed while at work because it can lead to appropriate legal actions against your business.
  • Protect your employees by creating a code of conduct.
  • Be sure to create policies against discrimination and harassment at work.
  • Don’t ignore any complaints that may arise and be sure to review the case carefully.

So these are the key tips to guard your business against litigations. Litigations are something that you don’t want to deal with as a business owner as they can eat up a lot of your income and time. But if you still find yourself facing a business litigation against you, be sure to talk to a business litigation attorney to know what legal actions you should take from there.

Disclaimer: The following contains general information about business litigation. No legal advice or opinion was stated in the article. For legal advice in this matter, kindly refer to a qualified attorney instead.

 Contributed by:- Cindy Dowling

Cindy Dowling, part time writer who offers a fresh take on various law topics with the pieces she writes for local firms. Cindy enjoys a good cup of coffee and a good book whenever she has the time.


Please enter your comment!
Please enter your name here