Protect Your Business: 3 Legal Options to Operate With Peace of Mind

Are you looking for ways to protect your business from legal risks?

Good move! For starters, about 50 percent of all small businesses are sued every year. Now, being sued doesn’t necessarily spell doom for your business, but lawsuits can be damaging.

In some cases, a lawsuit can lead to business failure. Many businesses have been forced to file for bankruptcy when facing multi-million court cases.

In light of this, it’s essential to take the necessary steps to protect your business. Let’s take a look at some measures you can implement.

1. Choose the Best Business Structure

The process of protecting your business starts during company registration, where you need to choose a structure that offers the best legal protection.

Generally, you have four structures to choose from. There’s a sole proprietorship, partnership, limited liability company (LLC), and corporation. These structures offer different levels of protection, so it’s important to know your needs and find the structure that best suits them.

However, most entrepreneurs who want strong protection form an LLC. This structure protects the owner from personal liability, which means your personal assets are safe in the event that the business experiences financial liabilities.

You can use this structure to your advantage to protect the business itself. For example, if your own a commercial building, you can lease it to the company instead of having it buy the property. In case a third party sues the company and wants to take possession of the building, they won’t succeed because the asset is in your name and not your company’s name.

2. Purchase Liability Insurance

In the course of normal operations, your business is exposed to a myriad of risks.

For instance, if a customer slips and falls in your brick-and-mortar store, they can sue for compensation.

Purchasing liability insurance provides a financial cushion. In the example above, the insurance company will compensate the victim if their claim is successful — as long as your coverage is greater than the claimed amount.

Many small businesses only purchase general liability insurance. However, there are other business insurance policies your business might need in order to be adequately protected. If you manufacture products, for example, you’ll also need product liability insurance.

3. Be Compliant with Relevant Regulations

There are federal and state laws that every business must comply with. From obtaining relevant permits and licenses to observing labor laws, your business has to comply or face regulatory fines and lawsuits.  

When starting a business, have a good understanding of the regulatory environment in your industry. If possible, retain a small business lawyer to advise you on the relevant laws and ensure your company is compliant.

Protect Your Business from Legal Risks

Proper management of legal risks is key to the success of any business. Start by identifying the various legal risks your business faces. You can then implement the strategies fleshed out above to protect your business.

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