Avoid Being Sued: Easy Ways To Protect Yourself And Your Business
Running your own business is fun, exciting and (hopefully) profitable. Getting sued when you run your own business is never good. Lawsuits are costly, time consuming and emotionally draining. If you can avoid being sued, you can focus on building your business.
1) Incorporate Your Business
More than any other thing, this is the best way to avoid being sued personally. Anyone can start a business. It can be a service related business like washing cars, cleaning windows or cleaning homes. It can also be a business that sells good such as selling products you make, products you import or products that you buy forma wholesaler. If you start a business and someone gets hurt or suffers a loss, you can get sued. If they win, they can collect against your home, bank accounts and other assets. Incorporating your business separates yourself personally from the business. If you incorporate, and they sue the company, (assuming that there is no intentional fraud or other such actions) they can only go after the assets of the company. To maintain this protection at a low cost, let a corporate lawyer maintain your company.
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2) Insurance Offers Legal Protection
Insurance will not keep you from being sued. What insurance does, is keeps you from the financial consequences of being sued. Lawyer fees and legal liability in terms of damages are paid by the insurance company. There is a wide range of insurance products to decide from. There are two more common insurance products for businesses. There is general liability insurance in case someone gets hurt in your, or because of, your business. There is also errors and omissions insurance, in case you make a mistake in your business. Talk to your insurance broker about which insurance product(s) is the best for you specific business. Also, do not for get to get proper insurance for any vehicle that is used in the course of your business.
3) Use Legal, Properly Drafted Contract
It does not matter what kind of business you have. If you are doing business with another person or company, you should be using legal contracts that have been properly drafted by a lawyer. Well drafted contracts, offer your business protection from being sued, make collections of account receivables easier, define exactly what you going to do for your customer so there are no disputes and may limit your liability. Each party will know what you will do, what you will not do, when you will do it and at what cost.
4) Avoid Being Sued By Keeping Good Records
In any business, you should keep proper records. This is an easy way to both avoid being sued and defending yourself if you are sued. Plumbers, IT techs, hair stylists even lawyers should all keep good records. Records will include the time and date that the record is made. Ideally the records will record exactly what was done for each customer. If you are offering a customer different choices of products or services, record which were offered and which the person decided on. This is extremely important where a customer decides on a less optimal choice (usually to save money) that may have some drawbacks to them down the road. In some businesses where the service provided is very routine, you may decide to limit your records to situations where there was a problem. For example, a nail esthetician may decide to only record situations where someone is hurt or cut and what was done about it.
5) Have Written (And Follow) Policies And Procedures
Having properly drafted policies and procedures is a good way to avoid being sued. Remember that to avoid being sued, you must also follow them. If you have employees, a policy and procedure manual will set out exactly what is expected of them. The manual will set out the best and safest way for everyone to perform their jobs. This protects your business, other employees and your customers. Even if you only employee yourself, a manual, that you routinely and strictly follow offers some protection.
6) Be Ethical, Honest And Moral
This advice to avoid being sued seems obvious. You will build your and your businesses reputation over many many years. There is no one client, dollar or transaction that is worth risking that. By bending rules or ethics you risk being sued by a party if injured. Even if that party is the company or person that you bent the rules for. By constantly “doing the right thing”, you will avoid being sued. Remember that “being creative” or “thinking outside the box” can lead to an innocent beach of these standards. Think them through thoroughly before acting on them.
7) Develop A Relationship With A Good Lawyer
This way of avoiding being sued may seem obvious and self-promoting for a lawyer to post in a blog. Before you dismiss it, consider this. There are often times in business that people do not know the legal consequences of their actions. By knowing potential risks BEFORE you act, you can avoid being sued. If you develop a relationship with a good lawyer, then when you have a quick question about the legal implications of something, there may be times where they do not even charge you because of your relationship. Relationships go both ways and your lawyer should value your business also. Sometimes having the knowledge of specific risks before you act can save you huge headaches down the road. Even if you are charged, if you can get that answer you need when you need it because you have a good relationship with your lawyer, you can save thousands by avoiding a lawsuit. Remember, lawyers often bill based on time. Unless what you need to know requires research, the cost to you should be reasonable.
8) Exceptional Customer Service
Being involved in a lawsuit sucks! This is true for the person who is suing and the person being sued. A very non-legal oriented way to avoid being sued is to offer exceptional service. Not only will it be less likely that you will be in a legal position where you are sued, there are other benefits. Since lawsuits are expensive, time consuming and emotionally draining, unless there is a very good reason to sue, many people will not. If a person is angry because of bad service, they are more likely to sue you on “principle” or just because they are mad and want to get back at you. People often are understanding when negative things happen unintentionally, it is how you as the business owner deal with it that will often be the difference of you being sued or not.
8) Watch What You Say
As a business owner you must watch what you say. Representations and warranties made about your product or service must be accurate and well defined. This is one of the key factors of number 3 above. To avoid being sued, all your representations and warranties should be specific and in writing. You should not make any additional representations or warranties, even if your contract excludes those made outside the contract. If you make claims about your product or service, be very sure you can back those claims up with actual proven facts. On another side, be careful with what you say about anyone else’s business. Negative statements that cannot be supported may lead to lawsuits for slander, defamation or libel.
9) Think Twice Before You Sue
We often see clients who perform a shoddy job but want to get paid in full. They sue their client for failing to pay but then are surprised when the client counter claims for damages. In many instances a business can avoid being sued by walking away from these situations. If the former client has walked away, maybe you should to. You should be aware if complaints or criticism that lead to non-payment are valid or not. Likewise, if a client is not happy and wants to walk away, think twice about suing for work that was not done or expenses not incurred by you. Again, you will know if a person is breaching a contract because they are unethical or if they have a significant reason based on your action.
10) Put Your Client First
Many professionals have a fiduciary duty to their clients or customers. This means that you have a high standard of care owed to that person. You are required to put their needs before your own. If there is any conflict, then you may not be able to act or help them. Even if you do not have a fiduciary duty to a client, operating your business like you do will not only help you avoid being sued, but will earn you an exceptional reputation and more clients or customers in the long run. The best example of this is a commissioned sales person who does not blindly encourage a customer to buy the most or most expensive products, but one that will encourage spending less because that is what the customer actually needs.
Building A Relationship With Great Lawyers
Call or email Kahane Law Office in Calgary, Alberta today. We are a full service law firm that works as a team so that you have the best lawyer for your situation. Let’s start building that ongoing relationship today. You can get us at 403-225-8810 or reach us toll-free at 1-877-225-8817, or email us directly here.