Small Business
6 min read
What Is a Hold Harmless Agreement, and Do You Need One?
Hold harmless agreements can help reduce a business's liability by having signatories accept a certain amount of risk.
Small Business
Vital Strategies that Promote Legal Protection for Small Business Owners
Get the legal advice you need without the hourly legal fees
Updated May 20, 2024
As a small business owner, you’re already juggling countless responsibilities. Legal protection might not always be top of mind—until you need it. These vital strategies can help you proactively protect your business and reduce your legal exposure.
1. Choose the right business structure
Your business structure affects your taxes, liability, and how you operate. Sole proprietorships offer simplicity but leave your personal assets exposed. LLCs and corporations provide liability protection that separates your personal and business finances. Choosing the right structure for your situation is one of the most fundamental legal decisions you can make.
2. Use written contracts for every transaction
Verbal agreements are difficult to enforce. Written contracts protect you by clearly documenting the terms of every business relationship—with employees, vendors, clients, and partners. Make sure contracts cover scope of work, payment terms, dispute resolution, and termination provisions.
3. Protect your intellectual property
Your business name, logo, and original content may qualify for trademark or copyright protection. Taking the steps to register and protect your IP prevents others from using your brand and gives you legal recourse if they do.
4. Understand your employment law obligations
If you have employees, you’re subject to a wide range of federal and state employment laws governing minimum wage, overtime, workplace safety, anti-discrimination, and more. Staying compliant reduces your risk of costly lawsuits and government penalties.
5. Keep personal and business finances separate
Mixing personal and business finances can “penetrate the corporate veil”—exposing your personal assets even if you’ve set up an LLC or corporation for liability protection. Maintain separate bank accounts and credit cards, and document all financial transactions properly.
6. Stay current on licenses and permits
Operating without required licenses or permits can result in fines, forced closure, or personal liability. Know what’s required for your industry and location, and renew licenses on time.
7. Build a relationship with a business attorney
Rather than calling a lawyer only when something goes wrong, proactively building a relationship with a business attorney means you have knowledgeable support when you need it. A LegalShield Small Business Plan gives you ongoing access to a provider law firm at a predictable monthly cost—so legal help is there before, during, and after a problem arises.
Explore LegalShield Small Business Plans to learn how we can support your business.
Frequently Asked Questions
Choose the right business entity for your enterprise, which will shield your personal assets from business lawsuits. To help with that choice, consult with a business lawyer to learn how to protect your small business.
Liability insurance offers all-around legal protection for small business owners and will minimize litigation risks because there is available money to pay for the losses.
If you’ve been wondering ‘how do I protect my company from a lawsuit?’, follow these seven steps to minimize liability: choose the right business entity for your enterprise and set it up the right way. Put everything in writing. Understand employment law. Protect your intellectual property. Get liability insurance. Pay your taxes properly. And get a good business lawyer.
LegalShield offers a wide range of affordable, on-demand services from document review to legal help with civil lawsuits online.
Get the Answers You Need, When You Need Them
Related articles
Small Business
5 min read
How To Franchise Your Business: A Six-Step Overview
Knowing how to franchise your business takes more than enthusiasm. It takes documented systems, legal preparation, and the right partners.
Small Business
6 min read
How to Transfer Property to an LLC: A 5-Step Guide
In this guide, we walk you through how to transfer property to an LLC in just a few steps, along with key things to watch for so you can make this change with clarity and confidence.
Small Business
9 min read
How To Create an Anonymous LLC: A Step-by-Step Guide to Business Privacy
It’s not available in every state, but certain jurisdictions allow you to form an LLC without listing members or managers in publicly searchable records.
Small Business
5 min read
A Guide to Starting an LLC for Real Estate
We’ll talk about how to start an LLC for real estate, and go over some concerns about personal liability in case something goes wrong.
Small Business
6 min read
How To Get a Business Name: 4 Common Methods
The naming process can involve up to four different methods. We’ll describe what these methods are and how to use them.
