Small businesses do not have all the protections that large corporations enjoy in the event lawsuits threaten.
That said, you can protect yourself and your business with some advanced planning that will save you from potentially damaging litigation.
Consider your personal liability
As a small business owner, a lawsuit could put your personal income, your savings and property you own at risk. If you must litigate a dispute, the court will examine whether you operate your business according to corporate form. This means whether you keep a separate bank account for the business, file a separate tax return and keep proper records. If not, your opponent could hold you personally liable.
Get to know your insurance options
The appropriate insurance can offer the first layer of protection for your business. Options include Employment Practices Liability Insurance (EPLI), Commercial General Liability (CGL) or Directors and Officers Insurance (D&O).
Establish professional relationships
It is important to establish relationships with outside professionals to whom you can turn in the face of an impending lawsuit. Their guidance will ease your mind and help you take appropriate action.
Litigation as an option
Litigation may be the last resort if your opponent is not interested in resolving a dispute through mediation or arbitration. The process can take years and can, of course, be costly. However, even if it seems you will head to court, a summary judgment process can take care of the matter before a trial. And any protections you put in place in a timely fashion will help put the brakes on a lawsuit before it has a chance to gather steam.