Reasons for Small Business Lawsuits And How to Avoid Them

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REASONS FOR SMALL BUSINESS LAWSUITS AND HOW TO
AVOID THEM
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• Being a small business owner is a wild
  undertaking. Whether youre opening a small
  retail shop or a franchise business, there will
  be hundreds of tasks you will have to perform
  while still monitoring the overall needs and
  growth of your business. From providing services
  to managing staff, and cash flow, its likely you
  come across a small business lawsuit.

Small business lawsuits are common, according to
the Small Business Administration (SBA), around
52 of small businesses have to face at least one
lawsuit at one point, and it influences small
businesses in almost every industry. A small
business lawsuit can have a significant impact on
your bottom line as well as your emotional
health. In order to avoid small business
lawsuits, you should understand the common
reasons why small businesses are sued and how to
avoid them.
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COMMON REASONS OF SMALL BUSINESS LAWSUITS

• Copyright Infringement
• Discrimination
• Inappropriate Behavior
• Labor Disputes
• Personal Injuries Property Damage

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The most common issues are related to the use of
the intellectual property. If you use images or
copy the intellectual property of another
business, even unintentionally, you may have to
face a lawsuit related to copyright infringement.

• Copyright Infringement

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• Discrimination

M U L T I P U R P O S E
Discriminative questions in the hiring process
can sometimes lead to costly discrimination
claims. Its not only illegal but also unsuitable
to ask questions about a candidates ethnicity,
religion, or sexual orientation. You can contact
the U.S Equal Employment Opportunity Commission
(EEOC) to ensure the legality of your
interviewing questions to avoid any
discrimination disputes.
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• Inappropriate Behavior

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• Labor Disputes

I order to avoid labor disputes, its crucial for
small business owners to be in compliance with
the labor laws. The Department of Labor (DOL) is
confining on labor law defilements, and they
collected a record-breaking 322 million in back
wages for more than 215,000 workers last year.
With the rise in labor law violations and
lawsuits, the business owner should review their
HR policies and employee classifications to avoid
experiencing labor disputes. According to the
DOL, overtime pay must be at least one and a half
times a workers hourly rate if they exceed 40
hours of work in a week.
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• Personal Injuries and Property Damage

Its the responsibility of every business owner
to ensure the safety of its employees and
customers. However, misfortunes can still happen
in the workplace, and if youre guilty, either
the client injured itself on your property or you
damage their property, the cost of personal
injury and property damage can quickly add up.
The best possible way to avoid such accidents is
to recognize and eradicate the risks and
regularly check your business workplace.
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• TIPS TO AVOID SMALL BUSINESS LAWSUITS

M U L T I P U R P O S E
Business Incorporation
Insurance Can Help
Use of Legal Contracts
Provide Exceptional Customer Service
Workplace Policies and Procedures
Keep Accurate Records
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Exclusive
Business Incorporation
Business incorporation can help your personal
assets from lawsuit obligations. Despite your
best practices, accidents can happen. If an
employee gets hurt at your workplace, you could
possibly be sued and end up paying from your
personal assets. If youre an incorporated
business, you get separated from your business
liability. This way, youll only have to
compensate for a potential lawsuit with your
business assets.
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• Insurance Can Help

Getting your small business insured not only
helps you keep off from getting sued, but also
lower the financial strains of a lawsuit by
separating your personal and business finances.
If you are sued, your insurance protection can
cover the legal fees and liability costs. Before
finalizing an insurance coverage plan, do
thorough research for different types of business
insurance. Most businesses opt for general
liability insurance aka business liability
insurance that provides protection against a
personal injury lawsuit at the workplace. Some
opt for professional liability insurance aka
errors and omissions (EO) insurance that
provides protection against negligence claims due
to harm that results from faults or failure to
perform. Different business has different needs,
and its best to talk with an insurance broker
about the insurance policy that works best for
you based on your unique needs.
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Use of Legal Contracts
Drafting legal contracts is essential when
dealing with another business or individual. This
applies to all since it protects your interests
in case of a business lawsuit. When you draft a
contract, list all the services or products
youre offering to a customer to minimize the
risk of legal disagreements.
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Every successful business has a standard practice
of keeping accurate records around-the-clock.
This way you can easily track the time and date
of an agreement along with the minutes of the
meeting and delivery promises. Documenting
records of any communication can help businesses
when a problem occurs to avoid a lawsuit. Keep in
mind that having accurate records can be used as
a protection in the case of a business lawsuit.
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Workplace Policies and Procedures
Drafting workplace policies and procedures can
also help safeguard your business against any
potential lawsuits. Creating policies and asking
your workforce to follow them properly will help
protect you against potential lawsuits. You can
also provide them employee operational manual so
they can adhere to policies and perform their
jobs better.
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• Provide Exceptional Customer Service

Keeping your customers contented with exceptional
customer service can help your business succeed
and stay away from lawsuits. Mistakes are
accidental and can happen in your workplace, and
with a trained workforce, you can prevent a
potential lawsuit. You should be able to
recognize when a customer is unhappy and
effectively handling the situation can help deter
that customer from turning to the courts to seek
compensations.
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• The Bottom Line

Running a small business carries different types
of risk. You can reduce the risks and personal
liability by focusing on risk-reduction measures.
Take time to gauge the potential risks your
business faces and initiate appropriate measures
to minimize your liability. When youre, get help
from your attorney and insurance coverage. Use
all the available resources to minimize the risk
and of small business lawsuits.
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