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What legal steps should I take to protect my small business assets in case of a lawsuit?

Picture of Chris Battis By   ·  1 minute read

As a small business owner, it is important to take steps to protect your assets in case of a lawsuit. Here are some of the legal steps you can take:

  1. Incorporate your business: By incorporating your business, you create a separate legal entity, which means that your personal assets are not at risk in case of a lawsuit against your business. This is because the corporation is considered a separate legal entity from its owners.
  2. Purchase liability insurance: Liability insurance will protect your business if someone is injured on your premises or if your products or services cause harm to someone. This type of insurance will provide coverage for legal fees and any damages awarded to the plaintiff in a lawsuit.
  3. Create a solid business structure: In addition to incorporating your business, it is important to create a solid business structure that includes clear divisions of duties and responsibilities, proper documentation of contracts and agreements, and thorough record-keeping procedures.
  4. Protect your intellectual property: If your business has any trademarks, patents, or copyrights, it is important to protect these assets. This can be done by registering your trademarks and patents and by implementing policies to ensure that your intellectual property is not used without your permission.
  5. Use clear and concise contracts: When conducting business with vendors, suppliers, customers, or clients, it is important to use clear and concise contracts that outline the terms and conditions of the agreement. This will help to prevent disputes and misunderstandings that could lead to legal action.

It is important to note that while these steps can help to protect your small business assets, there are limitations and exceptions that may apply in certain situations. For example, if you engage in illegal activities, your liability insurance may not cover you in case of a lawsuit. Additionally, if you do not follow proper record-keeping procedures or fail to register your intellectual property, you may not be able to enforce your rights in a court of law.

If you have any questions or concerns about how to protect your small business assets, it is always best to consult with a licensed attorney who specializes in small business law.