When you set up a business, I bet you were excited about the opportunity? Fast forward a few months and now you’re staring down the barrel of a lawsuit. Sadly, the prospect of facing legal action isn’t uncommon in today’s day and age. On average, there are more than 500,000 civil cases on a yearly basis, and the number is rising. President Trump himself has accounted for 3,500 for and against him and his family. Business owners don’t like to hear it, but avoiding legal action is almost impossible.
So, what are the other options? After all, the odds are the business won’t be able to afford the average $50,000 payout. The answer is to prepare for the worst to ensure that nothing comes as a surprise. With that in mind, here are five ways to deal with legal action as an SME.
Watch Your Mouth
As a rule, this is a good motto to keep in mind, especially in 2017. Nowadays, businesses will file a suit for something as simple as a bad word in their direction. Seriously, the number of frivolous lawsuits is high, but that doesn’t mean they get thrown out straight away. Even a lawsuit you are bound to win costs money, time and energy. The trick is to think before you speak and to ask anyone who represents the firm to do the same. That means not doing business or making comments outside of the office or using questionable methods. It also means acting as professional as possible in a public arena. Remember that a citizen in the US can always plead the fifth.
Consider The Options
Dealing with a lawsuit should bring out your creative side. Some people don’t like the idea of playing with the law, but loopholes do exist. If you want to keep your head above water, you need to exploit one and use it to the firm’s benefit. Is the company struggling to keep creditors off its back? If the answer is yes, a voluntary liquidation agreement is an excellent option. One of the pros of filing for liquidation is that it stops any legal action immediately. In financial lawsuits, some businesses even opt for bankruptcy. As long as the debts are unsecured, they are wiped out and the firm gets to begin afresh. The above is one example of using the system in the company’s favor, but there are plenty more. Don’t be afraid to research the situation and figure out your options.
Separate Individuals From Business
It is one thing for the company to get sued, but it is another for you get taken to court. The last thing any owner wants is to end up personally liable, but that could happen. How? It’s down to the formulation of the company. Typically, there are four to five choices for a new business, from a sole proprietorship to a limited company. All of them have their pros and cons, yet a proprietorship is the one which puts the boss at risk. Simply put, it means the person in charge is responsible for any legal action which comes the business’s way. The key, then, is to separate yourself from the firm by putting buffers between your assets and the company’s.
Hire A Great Attorney
It is possible to take responsibility for the tips above, but it isn’t a good move. From separating the business to filing for liquidation, you need legal knowledge. Otherwise, both you and the company won’t feel the benefits, and it will increase stress levels. By hiring a lawyer, there is no reason to worry about the result because of their experience. A good tip to remember is that every attorney isn’t the same. The law is varied, and most specialize in one area. Therefore, the firm might need more than one depending on the type of lawsuit. For example, a commercial lawyer would be perfect if the business was to file for liquidation.
Last but not least, make sure there is coverage in case the worst happens. Lots of business owners take on lawsuits and lose, and that is a fact. Thanks to liability insurance, the company’s finances don’t have to suffer as a result of a loss. Like all policies, the insurance firm picks up the check and covers the cost. Of course, the premiums do increase in the future, but it’s a small price to pay.
The next time the business faces legal action, be sure to consult this advice.