As a small business owner, you should take all the necessary measures to protect your small business from lawsuits because plaintiffs across the U.S. file more than 20 million business-related civil cases, including contract disputes, in the U.S. state courts every year. Out of these, 11% are tort cases, including wrongful death suits, employment discrimination, and slip and fall cases.
The median costs for business and contract dispute lawsuits start at $54,000 and $91,000, respectively, according to courtstatistics.org. Moreover, figures from the Bureau of Justice Statistics show the average judgment awarded for contract disputes is $68,000 punitively and $35,000 compensatory.
Keeping this in mind, here are three important tips on how to protect your small business from being sued.
Tip # 1 – Consider Alternate Dispute Resolution (ADR)
Alternate dispute resolution mechanisms such as arbitration and mediation offer a viable way to resolve business-related disputes without necessarily going through the court process, which can cost a significant amount of money. Provided all the parties involved in a business transaction agree, you can insert clauses in your contracts that compel the parties to use alternative dispute resolution methods to solve any potential contract disputes, reducing the possibility of going to trial. Another effective form of ADR is negotiations. More specifically, instead of going to court, you can try to negotiate with the aggrieved party for a more favorable settlement.
Tip #2 – Watch Your Words and Actions
The reputation of your small business is critical. For this reason, you and your employees should not conduct any business or make any statements that the public might misinterpret or take the wrong way. Examples of such statements and actions include potentially libelous or slanderous announcements, and conducting business with unscrupulous entities or individuals. Even if you believe your company’s morals and values are beyond reproach, such actions are likely to damage your business’s image. Additionally, to protect your small business from being sued, no one in your business, including yourself, should engage in activities that may give rise to a conflict of interest.
Tip # 3 – Keep Immaculate Business Records and Protect Your Customers’ Digital Data
In the fast-paced world of business, verbal and handshake contracts are quite common. However, in the event of a dispute, such contracts are of little help. For this reason, always ensure you put down all your business records, including your business contracts, in writing. Beyond helping protect your small business from potential lawsuits, immaculate business records will make your business operations smoother, improving efficiency and productivity. On the digital records front, ensure all of your business systems and records are safe and secure.
In particular, take all the necessary measures, including using malware and firewall, to protect your customers’ personal data from cybercriminals. This is particularly important because data breaches and the associated lawsuits are currently on the rise.
The aforementioned tips can help protect your small business from being sued. Another way to protect your business is by getting the right insurance policy. For all your coverage needs, contact the experts at Gant Insurance Agency in McKinney, Texas today.