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Protecting You and Your Business From Lawsuits: What You Need to Know
Running your own business is an exciting endeavor for a wide range of different reasons. First, you get to be your own boss - there is nobody in charge of your daily activities beyond you. Secondly, you get to bring together a number of like-minded individuals to help further your own vision. But as is true with most things in life, there is also a fairly significant downside: lawsuits.
Legal action is a common threat to many business owners, regardless of the type of industry that you're operating in. While what follows should not be taken as legal advice in any way, there are still a variety of best practices that you can follow to help protect everything you've worked so hard to build from legal jeopardy.
Get Absolutely Everything in Writing
By far, the most important step you can take to protect your business from a lawsuit involves putting absolutely everything in writing: chief among them agreements.
If you enter into an agreement with a vendor where you are to perform X task, and they are to perform Y, don't just "sign it" with a handshake. Have a lawyer draw up documents outlining exactly what is to be done and get both parties to sign on the dotted line.
That way, if there are any discrepancies later, you'll have something to fall back on in terms of defining the scope of what the original agreement actually was.
Keep Accurate Records
Along the same lines, it's also of paramount importance that you keep accurate records - no matter what.
Any important details should be captured from every business transaction and stored in perpetuity. This includes data involving the price and delivery date of services or products that you provided, for example, as well as other information that you might find on an invoice.
Again, that way if there is the potential of legal action later on, you'll at least have a complete picture of what you're working with and whether anything that went wrong was your fault.
Consider a Trust
One step that many people far too often overlook involves creating a trust to protect them from not only lawsuits but also creditors and other businesses as well. The person who manages a trust is referred to as a trustee, and they will have the final word over how the assets in it are handled.
This is important because the type of trust you'll likely want to use as an entrepreneur is irrevocable in nature. This means that once the trust is put in place, the rules cannot be altered or changed in any way without going through a special process.
Any assets that you wish to protect are then put into the trust in the unfortunate event that your business is subject to legal action. The trust itself will include many important points like the rules about how those assets can be eventually disbursed, who the trustee is, who will come into the situation if something happens to that person, and more.
The point is, even if your business is sued, any assets placed into the trust will likely be off limits provided that it was set up in the right way in the first place.
Your Reputation Matters Most of All
Finally, a critical step to help protect your businesses from lawsuits involves guarding your reputation at all times.
Any seasoned entrepreneur will tell you how essential a reputation is. As you do more excellent work and create more satisfied customers, they in turn tell others, who then become customers themselves. You begin to get a reputation for exceptionalism that people aren't likely to find anywhere else.
On the other hand, if you develop a reputation for shoddy business practices or shady ethics, it isn't just going to end up costing you potential customers. It also makes you more likely to get sued in the first place, and more likely to lose that lawsuit because your reputation is something that the courts will be looking at.
In the end, business veterans can tell you that lawsuits are not a matter of "if," but "when." Unfortunately, there's very little that you can do to actually prevent yourself from becoming the target of any lawsuit throughout the entirety of your business' existence. But what you can do is help protect your business against becoming the victim of a frivolous lawsuit, which in and of itself is the most important benefit of all.
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