Reduce Liability Risks for Your Small Business

By Randall Orser | Small Business

Operating your own small business can be freeing and exciting. It can feel very good when you go your own way and make your own way, and if you do it right, your future could be unlimited.

Sadly, for the small business owner, there are those that want a piece of the action, so businesses are frequently the target of frivolous lawsuits. 

The cliché, an ounce of prevention is worth a pound of cure, couldn’t be more suitable for lawsuit prevention. Your best bet for dealing with a potential lawsuit is to take the liability risks head on. You have the opportunity to use some things every day to prevent such an occurrence and getting rid of those dangers can go a long way. What can you do to reduce your risk of legal liability? Here are some things you can do.

Research Applicable Laws and Regulations

Before you get your business going research applicable laws and regulations, so you don’t end up regretting it later. Getting caught off guard by the law is never a good thing, and it could put you on the losing side of a lawsuit. As small business owner you need to become aware of applicable laws and industry regulations and ensure you meet them to the letter, if not the spirit.

Stick to What You Know Best

As business owner, you end up doing it all, especially at the beginning, however approaching unfamiliar tasks or working on something you’re not qualified to do increases the risk of an accident and the potential for a lawsuit. Find people with the necessary skills, and delegate those tasks to them, which costs more upfront, however, in the end will probably save you much more.

Get It in Writing

The days of the handshake over a deal are long gone. In whatever endeavour you’re doing, you need to get it in writing with a contract, however don’t get sloppy and pay attention to the paperwork ensuring you get legal representation for any contract you write, or sign. Yes there is an initial cost for using a lawyer to draw up contracts, but this could end up stop potential lawsuits later.

Hiring and Firing Staff

Your small business can be at risk when hiring the wrong people, or even firing unsuitable employees. Staffing decisions are a regular target for lawsuits, which you may not have the wherewithal to defend. You need to be extra careful when hiring new people for your small business, and even more vigilant when letting them go. You need to document everything when it comes to employees: tardiness, insubordination, errors, etc., in every step of the warning and termination process.

Not Engaging with Customers

As a small business owner, you need to engage with your customers otherwise you’re heading for trouble. Customer complaints are something you definitely need to address as it’s not only bad for business but could fend off future lawsuits. You should be engaging with your customers on a regular basis via social media, your website, email, or in person, in order to preserve good relationships with your customers.

Lack of Insurance

Too many business owners are running their business with too little or no insurance and that’s highly risky. You need to understand your insurance needs and the risks that you are taking, analyze your situations all the time. For those about to start a new business venture, talk to an insurance agent familiar with your industry or a lawyer to determine possible risks and how to address them.

While running your own business can be very satisfying and profitable, you need to recognize your risks, and be ready for them. Small business are usually targets for legal action, just being a small business could put you at risk. Nonetheless, you can do things to reduce your liability risks inherent in your industry, and the above tips can help you.

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About the Author

President/CEO Number Crunchers® Accounting Inc. Learn how to just say stuff it to this bookkeeping thing with our 'Just Say: "Stuff It" To Bookkeeping program.