Small business owners are generally more at risk than the executive officers of a large corporation when a lawsuit threatens.
You may be a building contractor, a bookkeeper, or a property manager. Whatever your line of work, though, you need to protect yourself and your business from a lawsuit.
About personal liability
As a small businessperson, you have no “corporate veil” to separate you from your business. You could face a lawsuit for various reasons: a dispute that arises with a competitor or subcontractor or an accusation of wrongdoing by an employee or supplier. The court will review your business practices to ascertain whether you are following “corporate form” with respect to the way you run your company. Depending on the circumstances, the court could allow the party bringing suit to hold you personally liable, putting your income and savings at risk.
In addition to workers’ compensation insurance, many businesses carry Employment Practice Liability Insurance, Directors and Officers Insurance, and Environmental Insurance, among other policies.
Issues for contractors
If you are a building contractor, your insurance needs are unique. Insurance coverage from general liability insurance to commercial vehicle coverage is widely available. Contractor’s insurance not only protects your business in case of a job-related accident, it is normally required before you begin work on a project.
When a lawsuit begins
It is essential that you have legal counsel if you are facing litigation. You also need to initiate a litigation hold, which means securing any documents that might relate to the lawsuit. You could incur penalties damaging to your company if the court determines that pertinent information has been lost or destroyed. As with having the kind of insurance you need to protect yourself and your business, preparing well for a lawsuit will help you weather the consequences and keep your company afloat.