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Ways for small business owners to reduce the risk of litigation

If you are a small business owner, you are not a stranger to taking risks. As a business owner, it’s imperative to take the appropriate steps to minimize the chance of something going wrong, such as avoiding costly, unexpected lawsuits Here are six things you can do to limit the possibility of lawsuit.

1. Consider getting insurance

There is a wide variety of insurance options available to small business owners. Specifically regarding lawsuits, consider the Employment Practices Liability (EPL) Insurance. With a small business, you are more at risk for lawsuits involving discrimination. These types of lawsuits can be very expensive and time consuming, and EPL insurance can help cover the hefty legal fees involved. If you want to know about the different policies available to you, contact an EPL insurance provider.

2. Treat every employee equally

Treating each employee differently will be a sure-fire way to get a discrimination lawsuit filed against you. In order to remain consistent with your employees, consider writing up an employee handbook, available upon hire, so that everyone knows what is expected from them and what they can expect from you as their employer. These manuals can also provide clear instructions for employees on how to fill out a complaint and how to notify management about possible misconduct that is occurring in the workplace.

3. Don’t neglect training your employees

As a small business owner, it is your responsibility to have a grasp on federal, state, and local employment laws. With this knowledge, it is important to impart it to your employees and make sure they are familiar with them as well. This helps in providing a safe and productive work environment.

These laws can change quite frequently, so it’s crucial to make sure you are up to date with any changes. This may include updating your employee handbook or manual, and holding annual training sessions for your employees to ensure they are familiar with employment policies and laws.

4. Maintain your files and documentation

If you make a decision or an action against any one of your employees, keeping detailed and consistent documents will help you in the event of a lawsuit. For example, say you fire an employee for underperformance. Then, one day they decide to come back with a lawsuit against you, stating you fired them for a discriminatory reason. By keeping a detailed record of how they were incompetent during the time they worked for you, it will protect you in court.

5. Make your business a separate entity

Many small business owners operate their businesses as sole proprietorships. If the business is sued or has a lawsuit filed against it, that means all of the business owner’s individual assets are free game and could be attacked in court.

One way to avoid this from happening, or limit the possibility, is to have a trust own the business. A trust is a legal entity that can own property, cash, businesses, and other important assets. If a business is owned while it’s in a trust, the only assets that can be attacked are the ones that are attached to the trust, leaving your personal assets unscathed.

6. Consult an experienced attorney

If you find yourself in the middle of a lawsuit, reach out to an experienced small business attorney. There are many intricacies that revolve around small businesses and lawsuits. If you want to be prepared, you cannot go about it alone. An attorney will be able to help you figure out what your next steps are, and develop a plan to make sure your business is protected.

Eliminating every risk in the workplace is an impossible endeavor. By implementing these proper procedures, you can reduce the likelihood of them occurring.

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