If you have launched a new company, you likely spend most of your waking hours working on the operational aspects of business ownership.
One aspect that you should not ignore is knowing how to deal with a possible lawsuit and preparing for this kind of issue in case it should ever become a reality.
Understanding what is at stake
The threat of a lawsuit, be it from an angry customer, a disgruntled employee or a troublesome competitor, is a possibility that every business owner must anticipate. Large companies are usually well-prepared and can absorb the financial consequences of litigation far more easily than small companies. As a small business owner, you must understand that because you do not have the benefit of a “corporate veil,” defending a lawsuit can put your personal property, income and savings at risk.
There are insurance options that you may wish to consider, such as Employment Practices Liability Insurance, Directors and Officers Insurance, Commercial General Liability, and Workers’ Compensation insurance. Meanwhile, if a lawsuit develops, you should put a “litigation hold” on any paper or electronic documents related to the suit. Make sure that all employees understand that they should not shred, delete or otherwise dispose of such documents in any way because doing so could result in penalties. The court may impose sanctions that could be very harmful to your business.
Developing helpful relationships
You may have developed business relationships with various professionals, such as a certified public accountant, a financial advisor and perhaps a business coach. An attorney whom you can rely on if a lawsuit surfaces will be an important addition to your list of professionals. When you prepare properly, including educating your employees, acquiring the appropriate insurance and developing helpful professional relationships, you can continue operating your business feeling more capable of dealing with a lawsuit that you hope will never come.