Launching a business is an all-encompassing endeavor. There are so many things to think about, so many decisions to make that you worry about forgetting something along the way.
One aspect you should address is the possibility that you may face a lawsuit at some point. How should you prepare for the unexpected?
Know about personal liability
Your specific business structure determines the extent of your personal liability. If you have a corporate structure, there is a separation between you and your business. However, perhaps you are a sole proprietor, or you and your spouse own the business together, in which case your personal income and any savings you may have could be at risk.
Explore insurance options
Certain types of insurance can protect you in the event of a lawsuit:
- Employment Practices Liability Insurance
- Directors and Officers insurance
- Commercial General Liability insurance
- Workers’ Compensation insurance
Take note that in addition to reimbursing a business owner for the costs incurred in resolving a lawsuit, most policies pay for the costs associated with defense.
Establish an attorney relationship
Even if litigation is not in the offing and there is apparently no cause for concern, you are sure to sleep better at night if you have access to and rely on legal guidance for your business interests.
If litigation does come up, contact your attorney immediately. You should then put a “litigation hold” into motion. This refers to identifying the people and documents that likely have information pertinent to the claim. Documents may exist in both electronic and hard copy form. You should also suspend any processes your business may employ to shred or otherwise destroy documents. You and your employees must preserve all types of information that could apply to the potential lawsuit. If it is later found that any evidence was deleted, discarded or lost, you could face stiff penalties, and the reputation of your business would suffer. Depend on your attorney-client connection. The relationship you developed will help see you through the ordeal of litigation, should it occur.