There are plenty of examples of major corporations that have been sued at some point in their history. While large, multinational enterprises can usually handle the financial loss that comes with a lawsuit, for smaller organizations, being sued usually represents going bankrupt. Even in those cases when the company wins, a lawsuit is, more often than not, a severe blow to its reputation. Many businesses never recover from it.
Unfortunately, there is no surefire, bulletproof way to prevent your organization from a lawsuit at one point or another. Mistakes happen, both at a managerial level and in the front lines. Besides, products fail, projects are delayed, and services are below expectations.
Yet, there are certain precautions new firms can take to minimize the possibility of facing a lawsuit. They are proper data management, intellectual property protection, clear contractual agreements, and knowledge of business law.
The Power of Information
The best way for a business to protect itself in a lawsuit is by having tangible evidence. It includes corporate emails, documentary records, contracts, receipts, presentation materials, meeting minutes, etc. As a result, a company should ideally keep both physical and digital records of these transactions.
To do this, a robust, reliable IT data management infrastructure should be one of the first things put into place. Whether your business is big or small, hiring the services of a reputable IT vendor is one of the best decisions any organization can make. Examples of these services are cloud storage, data recovery and protection, and network management and infrastructure.
Intellectual Property Protection
Intellectual property is another factor all new businesses should consider. Among others, intellectual property includes copyrights, patents, and industrial designs. And this is not only true for IT and other applied sciences companies. While most technology start-ups understand the value of IP, many starting businesses in other industries do not. They fail to do their due diligence. The result is unnecessary lawsuits or worse, others stealing their ideas.
Whether your business sells unmanned flying robots or birthday cakes, if there is any method in doing this specific to your organization, protect it. Paying for patents and copyrights will save you a lot more money and many headaches in the future.
Clear Contractual Agreements
There are many types of contractual agreements within an organization. Businesses have employment contracts with their staff. They also have product sales agreements and service contracts with their customers. A small business might also have a rent arrangement with a landlord or real estate company or outsourcing settlements with call centers and cloud storage providers.
The important thing is not what kind of contracts your firm has or how many. What’s important is to understand that all contracts are different, some more so than others. Hence, starting businesses must have a qualified individual draft the different types of contracts used by the organization.
Knowing the Law
Not knowing the law is not an excuse for breaking it. This defense strategy will not hold up in any court. It is unfortunate to see how new businesses with great potential do not succeed because of avoidable legal mistakes. Having a great idea doesn’t mean you know about business law, taxes, and how to set up an enterprise.
So do your research, take the time to understand the difference between a sole proprietor business, a partnership, and a corporation. Your wallet will thank you for it.
The key to success for new businesses is to start on the right foot. To do this, organizations must be aware of the legal ramifications launching a new company has. By taking proper care of company data, protecting your IP, having clear contractual agreements, and knowing the law, your firm will find itself on the best, most affordable path to success.