Three Simple Ways To Avoid Lawsuits

Clarify and Manage Expectations

Hanna Hasl-Kelchner

While many small businesses are concerned with cutting costs on a day-to-day basis, few think about protecting themselves against one of the most dangerous threats to their budgets and to their companies as a whole-a legal problem. Business lawsuits are costly (sometimes resulting in bankruptcy), time consuming, and emotionally draining. Here are some tips to help you avoid three of the most common small business traps.

Establish employment policies. Good employment policies are one of the best business investments you can make. They help employees know what's expected of them. Unfortunately, even the simplest policy statements are pretty boring. You can make them more user friendly by breathing life into them with periodic training that helps employees apply the policies to their everyday work. When applied consistently, policies mitigate misunderstandings and perceptions of unfairness that can escalate into legal claims.

Protect your brand. Your customers recognize your business by its name and your brand names. These names symbolize your company's distinctiveness-its style, service, and products. Imagine how disruptive it would be if someone else used those names without your permission. You can protect these valuable assets through trademarks. 

Negotiate good contracts. Good contracts, like good employment policies, are invaluable for clarifying and managing expectations between you, your customers, and suppliers and for avoiding surprises. Negotiating warranties, limitations of liability, and termination provisions you can live with will save much unpleasantness later on if the deal crumbles. And if the deal is a success, the contracting process will have served to build trust and provide a foundation for continued growth.

Nothing will make your business bulletproof in today's litigious environment. But these three simple tips will go a long way toward protecting your business and allowing you to use your profits to grow your business, instead of defending it in a court of law.

Hanna Hasl-Kelchner is author of The Business Guide to Legal Literacy: What Every Manager Needs to Know About the Law.