If you have recently launched your new company, you are no doubt inundated with the many responsibilities involved with making your business a success.
The possibility of having to defend a lawsuit may be far from your mind. However, litigation is always a risk for business owners, and you should prepare for the unexpected.
Understanding your personal liability
As a small business owner, you could face devastating financial consequences if you must defend against a lawsuit. During litigation, the court will want to know if you are following a “corporate form” with respect to keeping your books, maintaining proper inventory records, filing your business taxes and so on. Depending on the reason for the lawsuit, the court may also allow the opposition to hold you personally liable if you lose. Your income, savings and property could be at risk.
Considering insurance options
It is important for you to think about types of insurance that can offer protection for you and your business in the face of litigation. There are several products to explore, including:
- Employment Practices Liability Insurance (EPLI)
- Commercial General Liability (CGL)
- Directors and Officers Insurance (D&O)
- Worker’s Compensation
Most insurance policies provide reimbursement for the costs related to the lawsuit itself and for the costs associated with your defense.
Developing professional associations
Professional relationships such as those with an accountant and a financial adviser are important to a business owner, as you have no doubt discovered. However, it is essential for you to develop a relationship with an attorney you can turn to if an unexpected situation arises. A seasoned litigator can provide the support you need in the event your business day suddenly begins with a lawsuit.