Saturday, October 31, 2020

There is plenty of risk involved in running a business. And many businesses fail because these risks become reality. If you want to avoid that fate and ensure your businesses succeeds, then you need to take proactive measures to safeguard it from liability. Fortunately for you, there are easy ways to ensure that you’re covered. 

Don’t Breach Your Contract

Before you dive in, it’s important that you understand how a liability suit functions. In order to be successful, a litigant must convince either a jury or judge that you, the business, acted in such a manner as to breach your contract with that person. Examples of breaches in responsibility include:

  • Failure to keep a safe working environment for your employees
  • Failure to protect the public or warn them of a dangerous product
  • Failure to avoid slander
  • Failure to uphold the civil rights act

Want to avoid being sued? Stay in compliance with the law and do everything in your power to protect both your employees and your customers.

Purchase an Insurance Policy


Do you have health insurance? Car insurance? If you don’t, you should. It can save you from financial catastrophe should the worst happen. The same principle applies to your business.

Few things can tank a company quicker than millions of dollars in legal fees and massive payouts. Liability insurance protects your business from a back-breaking lawsuit, especially if you are court-ordered to settle.

Before you move on to the next section, it’s critical that you note the following. Do not naively assume that an insurance policy gives you carte blanche to do anything that you want. If you are found in breach of your contract, you can lose your insurance! Possible reasons for a breach of contract include:

  • Intentionally causing harm to your employees, customers, or a rival business
  • Utilizing company funds for personal expenses
  • Being audited for tax errors
  • Making false promises
  • Failure to obey tax laws
  • Non-compliance with business regulations

If you’re found in breach of your contract, all coverage will be null and void.

Perform a Background Check When Hiring Employees

Your employees are the face of your company. They represent your brand. What they do reflects on you, especially if something illegal occurs under your watch. As a result, it’s critical that you know who it is you are hiring.

If you hire an employee and fail to properly screen them, you could be held liable in the case of a crime or injury. For example, imagine you have an employee who, unbeknownst to you, lost their license for a DUI. If you let them drive your company car and they get in an accident, that could fall on you. So, perform a criminal background check for employment to dig deep into a potential candidate’s history.


Keep Meticulous Records

Whether you’re a small business or a larger company, one of the easiest ways to protect yourself is to keep careful records of all your business interactions and transactions. Consider documenting and storing all of the following items:

  • Notes from meetings and calls
  • Your calendar
  • Bills
  • Contracts
  • Legal documents
  • Payments

If there is ever an issue or complaint made by a customer or employee, take it seriously, address it, and save a record of the entire process. You’d be amazed how life-saving all of this information could be in the case of a wrongful lawsuit.

Hire a Lawyer

You may balk at the thought of paying an exorbitant hourly rate to a lawyer, but this is not one of those services that you want to go bargain hunting for. A good attorney can counsel you on how to avoid or prevent liabilities. They can also function as a mentor, guaranteeing that everything is on the up and up.

Do you know all the laws and requirements pertaining to liability insurance, documentation, contracts, and payments? No? Then engage the services of someone who does.

Operate as the Right Business Entity

Are you listed properly on all of your business and tax documents? If you are a sole proprietorship but are listed as an LLC, you could lose your liability insurance coverage since different entities have different insurance coverage.

Your product or service can determine what entity you’re categorized as, so speak with your attorney to confirm that you’ve been properly classified.

Be Cautious

Running a business is a massive responsibility. If you are not careful you could be held accountable for issues with your employees and customers. Take the time to work with your lawyer and lay the groundwork for liability prevention.