Small business owners never want to find themselves facing a lawsuit, but they must prepare for what some experts say is inevitable.
When litigation looms, your personal worth and the life of your business are on the line, but you can rely on the safeguards you put in place.
Understand your personal liability
Lawsuits can arise from any direction: suppliers, competitors, a departed employee, a disgruntled business partner. As a small business owner, you do not have the kind of protection that large corporations enjoy. One serious legal entanglement could cost tens of thousands of dollars and jeopardize your personal income and savings, and, in the process, destroy your business.
Consider insurance options
If a lawsuit occurs, insurance can help protect both you and your business. Most can cover the litigation costs for which you are responsible, and some will also pay for your defense costs. Examples of insurance products to consider are Directors and Officers Insurance (D&O), Employment Practices Liability Insurance (EPLI) and Commercial General Liability (CGL).
Develop professional relationships
As a small business owner, you need professional relationships such as an accountant and a financial advisor. Your relationship with an attorney to whom you can turn if a lawsuit occurs will be invaluable.
Should a lawsuit become a reality, your first step is to contact your attorney. Next, you need to place a litigation hold on any and all information that is likely to pertain to the legal issues. This means securing both hard copies and digital versions of the documents you will need. If you misplace or throw away information important to the lawsuit, the court could impose sanctions that could harm your business. Be cooperative, rely on your insurance protection and your legal support, and you and your business will survive potential litigation.