In our previous article, we spoke about how to protect your business against natural calamities. Continuing along the same line of discussion, let us see how you can keep defend your small business from a disaster of another kind – a big lawsuit!

A lot of people are apprehensive when it comes to starting their own business, for a very specific reason, which has nothing to do with the conduct of the business, or market conditions. Their concern is the possibility of their business being dragged into a lawsuit and the consequent havoc it can wreak. Do we need to remind you that when an entrepreneur is taken to court, he not only loses money, but also time, reputation and peace of mind?

Here are some tips that may keep your business from being taken to court, or should the worst happen, help you win.

1. Be careful when dealing with employees.

Your employees can take you to court any time.

Whether they are stealing office supplies or sneaking out early, employees from hell are everywhere. And if you dismiss them, they might end up serving you with a court notice. So, before you show someone the door, we would suggest that you consult a lawyer who specializes in employment issues.

Added to that, you can read up on the latest Federal Employment Regulations on the websites of the Department of Labor, EEOC and OSHA. However, local regulations are often trickier to track as each state has different regulatory agencies. That’s where a lawyer’s expertise brings value.

2. Take care with contractual terms.

Very often, entrepreneurs discover that even if they win the battle, the court doesn’t allow them to recover the money incurred in the legal process, from the other party. To preempt this, include a clause in all your important contracts and agreements stipulating that in the event of a legal battle in which you emerge the victor, all your legal costs will be reimbursed by the opposing party.

Such a clause also helps to deter frivolous lawsuits, and encourages out of court settlement.

3. Check your business insurance policy.

Most business owners have no clue as to the nature and coverage of their business insurance policy. If you’re among them, waste no time in correcting the situation. Ask your insurance agent to tell you exactly what kinds of liability are covered under your current insurance policy. Should you find some obvious gaps, arrange to take additional cover – in times of trouble it will be well worth the expense.

In the age of unmitigated litigation, you never know who will take you to court, and for what reason! From employee or gender discrimination issues to product liability … all of these are potential reasons to be dragged into a legal tussle. It is best to be over-prepared than under-protected. Take heed of our advice while the going is still good.