You probably knew before you opened your doors that running a business comes with some legal risk. Still, most business owners never expect someone to file a lawsuit against them or their company.
Unfortunately, business litigation remains a constant threat, even when owners are careful not to break the law or violate anyone’s rights. You can’t always prevent business litigation if the other party is particularly determined, but a few proactive tips can minimize your legal risks.
Choose the right legal entity
You can reduce your risks substantially by incorporating or operating as a limited liability company (LLC). If a dispute leads to litigation, the proper entity provides protection against the loss of personal assets. Certain entities also offer valuable tax benefits. For example, running an LLC protects businesses from double taxation.
Follow employment laws carefully
Never forget that your workforce has federal and state-level protections. Refresh your knowledge of Hawaii labor laws frequently to avoid litigation initiated by a disgruntled current or former employee. It’s also wise to have a detailed employee handbook that clearly outlines your anti-discrimination and harassment policies.
Use protective contracts
You might be tempted to rely on premade cookie-cutter contracts for legal agreements with your associates (suppliers, employees, etc.). Unfortunately, these documents provide little if any protection against disputes and litigation. Contracts tailored to each specific need or use are much more effective at preventing lawsuits and even simple misunderstandings.
When you understand how disputes lead to business litigation, you are well-prepared to address a lawsuit when and if it arises. Continue learning more to gain additional insight into litigation prevention.