Litigation is every business owner’s worst nightmare. It costs money and takes up your precious time. In the end, it can even harm the reputation of your business. Unfortunately, litigation can’t always be avoided. But there are a few best practices that business owners should follow to reduce the risk of being sued by employees, clients or customers.
First off, you need to plan for a potential lawsuit. Sometimes, you can’t avoid litigation, so invest in legal advice if you have concerns about an issue. You should also build a litigation budget into your business plan. It is always better to be proactive rather than reactive. Paying an attorney to help you prevent a possible dispute will be less costly than waiting until the dispute turns into a lawsuit. It is also helpful to have a litigation budget in place to make sure you are prepared for the worst-case scenario.
Creating written agreements is another key to reducing the risk of litigation. The main contracts you should have are your business partnership agreement, a master service agreement with clients, a contract with independent contractors, and an employment agreement. But a contract isn’t enough. The agreement itself needs to be reflected in the contract. Too often, small business owners sign a “contract” that doesn’t actually reflect their “agreement.” It needs to clearly state the terms, conditions and responsibilities of each party. The contract can even serve as a foundation for your business attorney to file a motion to dismiss the lawsuit.
Think you’re safe? Not yet. Make sure you have insurance. It may be a pain to pay it every month, but when litigation happens, it’s nice to have someone else foot the bill.
Finally, here is a valuable piece of advice for dealing with an upset employees, clients or customer: People are less likely to file a lawsuit if they are being treated with kindness. Some conflicts can be solved without going to court.