Management December 29, 2015 Last updated September 18th, 2018 2,981 Reads share

How to Mitigate Your Legal Risk Before You Get Sued

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For more than 10 years, I’ve been the head of several companies. In those years, I’ve learned a thing or two—and more—about how important it is to be prepared for legal risk issues. The truth of it is, no matter how careful you are, something will come up, sooner or later. So it’s better be prepared and not to assume that nothing will ever go wrong.

As entrepreneurs carefully plan out every step of their project, unfortunately one of the last things on their mind is legal issues. Nearly 50% of new businesses tank within the first 18 months for different reasons, including legal issues and compliances. And these are exactly types of things that can sink their company.

So as a business owner, what should you do to protect your business? Here are some common sense recommendations.

Be prepared.

At what point in your business preparation do you need to start thinking about your legal responsibilities and risks? Quite frankly, on day one. As soon as you have employees, you should have worker’s comp insurance, for example. Before you need legal advice, you should know who you would call if you needed legal advice.

It’s tempting to think that you can be cautious enough or careful enough that you’ll never need these things, but there’s no way to avoid it perfectly. All it takes is one person slipping and falling in your store or an accident involving one of your employees, and you can be looking at thousands, or hundreds of thousands of dollars in medical bills.

  • Know your responsibilities. Contact your local Chamber of Commerce to make sure you’re up to date on what’s required in your area, and make sure you have a way of staying up to date, if regulations change.
  • Check with Labor Commission in your state. Make sure you meet all their requirements and training standards. According to Omega Comp recent case studies, there were numerous violations in the State of California and fines vary from $500K to $12 million. These types of fines can bring even the biggest employers to their knees.

Businesses are regulated by state and federal laws, and regulations may vary from state to state or even from one industry to another.  Failure to comply with these laws and regulations may result in forceful fines. Stay in constant contact with authorities that regulate your business, since regulations change over the years.

Be insured.

Too many entrepreneurs look at the cost of monthly insurance and say “Oh, this is too much, I can’t afford it.” I would argue that if you can’t afford to insure your business, you can’t afford to be in business. After all, what would happen if there was a flood, and all your equipment was destroyed? What if a tree fell on your building? What if you were robbed? These are all real issues that will destroy a business if there is no insurance cover.

I’ve been in the moving industry since 2002; I’ve seen cases where truck driver fell asleep at the wheel. Thankfully, with the help of the The Doan Law Firm, an awful situation was resolved in favor of their client. In this case, it was uncovered that the driver was at fault. The case was settled out of court for 688K due to expert legal advice.  I’ve seen many, many situations where businesses were not so lucky and had to shut down their operations and declare bankruptcy.

No matter how careful you are, things happen and it’s a part of business culture we all have to deal with. There are too many contingencies to plan for; that’s why we have insurance. When things go wrong, your insurance company can make it right. Because no one expects a business to have enough cash to rebuild itself from the ground up.

Not sure what insurances you really need?

  • Work with your local Chamber of Commerce to find out who has a good reputation as an insurance agent for business.
  • If you’re working with a bank or lender for capital funding, find out what insurances they require, and find out who they recommend that you work with.
  • Ask questions! Find out what your insurance does cover, and what it doesn’t.
  • Make sure all your employees are insured and the insurance covers the cost of medical treatment and lost wages.

Don’t DIY.

If there were ever a place to avoid doing it all yourself, this is it. Especially if (when) you need to make a claim against your insurance, expect that you’re going to need to challenge offers, work with the insurance company, and that you are very likely to need a lawyer.

If you need legal advice, and aren’t sure how to get it, Legal Aid is generally a good place to start. You may run out of funds and try to save every dollar you can, but this is definitely not the right time. Do not Google. The Internet may be a great place to find a recipe to make for dinner, but it’s horrible at both legal advice and medical opinions. No responsible lawyer gives legal advice online, and that’s infinitely truer when it comes to static platforms like websites and blogs.

  • Always, always, get legal advice from a practicing lawyer in your area who is familiar with your situation. Not all lawyers know about all issues! You wouldn’t ask your psychiatrist to operate on your broken leg, and you shouldn’t ask a family court lawyer about the intricacies of corporate law.

Businesses run into incredibly difficult situations. They may or may not be liable, they may or may not be able to handle what’s coming up, but they should always handle situations professionally and sensitively. That means contacting experts, being polite and courteous to all parties, and making sure that they take care of business. Insure what can be insured, and be careful with the rest.

It can be the difference between staying in business, and not.

Images “Multiethnic People Meeting Safety Risk Business Insurance Concept  /


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Margarita Hakobyan

Margarita Hakobyan

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