How to Protect Your Business Against Lawsuit: 6 Ways

by Anne B. Robinson

No one, least of all business owners, intends to be sued over an employment dispute, but it happens all the same. A lawsuit can have serious consequences for a company. Not only can it hit you financially, but it can even ruin your company’s reputation.

Although there’s no way to completely protect yourself from legal trouble, you can make efforts to decrease your risks. And even if you don’t believe to be in imminent danger from a lawsuit, there are several measures you should take to best protect your business.

1. Use Responsible Employee Practices

Numerous local, state, and federal statutes protect workers from discrimination, harassment, and infringement on their right to privacy in the workplace. Knowing and abiding by these regulations is crucial. This is why you should learn about the coverage necessary to protect your business, such as employment practices liability insurance. Now, you might be asking yourself, “What does EPLI cover?” In short, it will protect you in the event of allegations of illegal behavior on your part, involving wrongful termination, discrimination, or harassment.

Find out which federal and state laws and regulations pertain to your business and study their specifics. Typically, every business is required to provide workers’ compensation insurance, by law, but this may differ from state to state. The next step is to draft and implement policies to guide your efforts toward compliance. To help you make sure you are fully compliant with laws and regulations for workers’ rights, consider hiring a human resources expert or an attorney specializing in employment law.

2. Choose and Purchase the Right Insurance Policies

In the case of a workplace accident, every business is required by law to carry general liability insurance. If an employee or a client sues you, error and omissions insurance can safeguard the company and give you a chance to survive and thrive. Your contracts, in addition to the insurance, should be well-defended and in line with the law.

To ensure that your employment contracts are legally binding, it’s recommended that you consult an expert in this area, like an attorney who is familiar with the applicable rules.

3. When in Doubt, Seek Legal Counsel

Legal considerations, employee conflicts, and client complaints are all part of running a business. This is why, talking to a good lawyer before launching your company, even if there is no immediate risk, is a great practice.

Do not attempt to solve the problem on your own; instead, confer with the attorney you have chosen. Keep in touch with them regularly and ask them any questions that may come up. Also, make sure your attorney is aware of your procedures, activities, and obligations so that they can assist you in the event of a legal dispute.

4. Beware of the Way Your Company Treat Others

Employees and owners alike should avoid doing anything that could put the company’s reputation in jeopardy. This encompasses both defamatory comments on social media platforms and sharing inside information about the company.

This also refers to possible conflicts of interest between employees. Try to keep your distance from any circumstances that can potentially damage the reputation of the business or its owners, employees, or partners.

5. Separate Your Finances From Your Company

There are lots of businesses out there that are just one person chasing a dream. However, while owning a business certainly has its perks, it’s important to keep work and personal life separate. Should the company be sued, the owner’s assets may be mixed with commercial ones.

This is why it’s important to see a lawyer about how to keep your business and personal finances separate. Taking these precautions will ensure that you don’t lose everything in case your company fails.

6. Keep Your Data Safe

The importance of keeping business data secure, in a day when most businesses operate entirely online, cannot be overstated. Antivirus and other system security software used by businesses should always be up to date.

If any of your company’s computers are ever compromised, there is a danger that sensitive data will not be secure. To avoid data theft, loss, or any kind of cyber-attack, it’s crucial to take all the necessary software protection measures.

If you are worried about whether your business will be able to carry out its duties in the event of an emergency, you may want to look into securing backup locations, portable generators, and remote access options.


Will your business remain trustworthy if an employee sues you? Can it stay operational if a hurricane or fire were to strike? Planning for potential threats to your business will help you avoid unnecessary complications. These guidelines will help you make sure that your business can survive and continue thriving in case of a lawsuit.

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