How to grow your Business

5 Tips to Protect Your Small Business From Lawsuits

Valentina GolubovicValentina Golubovic
Last updated on:
February 10, 2024
Published on:
July 6, 2023

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 Small business owners can face some of the most unique and challenging legal issues. With every risk comes the possibility of a lawsuit. Whether a startup or an established enterprise, no organization is immune from legal danger, so you must have safeguards. The following are proactive steps you can take now to protect yourself and your company from potential lawsuits.

1.   Conduct a Background Check

It's important to thoroughly screen potential employees and contractors during the hiring process to reduce the chances of misplacing trust or opening yourself up to legal action. Background checks can include criminal history reports, credit/financial background checks, education verification, and skills assessment tests.

In addition to a thorough screening process during the hiring phase, employers should also consider conducting regular reviews of employee records and activity on an ongoing basis. Consider implementing an automated system for running background checks on new hires so you don't have to do this manually each time someone joins the company.

2.   Get Proper Insurance

Businesses should consider getting a general liability policy that provides coverage in case of customer injury, property damage, libel or slander charges, and other similar scenarios. There are also many other types of business insurance available like commercial auto insurance, professional liability insurance, and workers' compensation. Work with an experienced insurance agent to determine which policies your business needs and try to get multiple quotes before selecting the best option.

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3.   Hire a Lawyer

An experienced lawyer can help you navigate business law complexities and advice on avoiding liability. An attorney can review contracts, help you understand applicable laws, and represent your interests in court if necessary. They can also serve as a valuable sounding board for ideas or decisions that could have legal implications for your business.

Consider speaking with a lawyer to get their opinion on any legal matters related to your small business and put processes in place to access their expertise quickly when needed. Hiring an attorney specializing in your small business industry is essential for getting sound legal advice tailored to your needs.

4.   Draft Detailed Contracts

Have clear and detailed contracts that outline all agreement terms, including payment deadlines, performance expectations, and other relevant information. Having a clear and concise contract in place will minimize ambiguity if there's a dispute later on. It also acts as legal protection should you find yourself in court sometime in the future. Read through each contract thoroughly before signing it, and consult with an attorney if needed. An employment contract is also essential in protecting you and the employee.

5.   Protect Your Business's Intellectual Property

Intellectual property (IP) can include inventions, trademarked logos and phrases, copyrighted materials such as music and movies, and trade secrets such as product formulas. Consider applying for patents, trademarks, and copyrights to protect your business's IP. It would be best to have non-disclosure agreements when disclosing confidential information with third parties and suppliers. It's also paramount to monitor your business's IP for potential infringement. Be vigilant of competitors or others who might seek to infringe or misuse your IP and take necessary legal actions to protect it if needed.


Preventing lawsuits and protecting your small business should be a top priority. To reduce the chance of legal action, conduct background checks, draft detailed contracts, get the right insurance coverage, hire a lawyer, and protect your business's intellectual property. Consult with an experienced attorney to ensure you understand all applicable laws so your small business can remain compliant and protected.


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