Whether we like it or not, running a business is risky. But usually, we think of it as being risky only from an economy standpoint. We rarely consider the fact that we might be at risk legally too. The reality, however, is that there are plenty of reasons why we might get sued as a business. Here are just a few.
You Didn’t Act In The Interest Of Shareholders
As the owner of a private business, you’re legally bound to act in the best interest of your shareholders. In most situations this is a given. The managers and the owners of the company both have an incentive to make the company a success. The managers can expect handsome bonuses and fat paychecks. And the owners can expect big dividends on their shares.
But sometimes the managers of a firm can act against the best interests of the firm. Sometimes there are opportunities to gain at the expense of shareholders. In that case, managers are not honouring their fiduciary duty. And as a result, they open themselves up to the possibility of being sued. Violations of fiduciary duty can lead to being sued, even if the violation occurred through inaction.
You Are Negligent
Personal injury claims are big business right now. Practically every law firm offers some form of personal injury service. And that’s no surprise, given how much money can be won through such claims.
It means that businesses have to go out of their way to make sure that they are not putting people at risk. Their customers might be in danger if their product is dangerous. And their employees might be in danger if their working environment is not safe. Things like excessive clutter or asbestos in the roofing can be a hazard that can lead to lawsuits. Don’t take the risk. Hire a company like Plansafe to assess your asbestos risk and take your health and safety to a higher level.
You Sign A Guarantee
Why do people set up limited liability companies? They do it because they want to shield their personal wealth from the risks that they take with their businesses.
But sometimes, just having an LLC isn’t enough. One circumstance is where you sign a loan guarantee when borrowing money. There’s nothing about signing the loan itself that says that you’re going to get sued. But the problem is that by signing the loan you’re suddenly personally liable for the debt. That means that your limited liability status won’t protect you.
Most people push on and sign so that they can get the loan. They then just hope for the best, assuming that they’ll make a return. The problem is that many don’t and they then open themselves up for damages. The best way to protect against this is to establish a clause in the terms that limits your personal liability. You want a cap, if possible on the level of damages that can accrue.
There are, of course, other ways in which you can be sued, through things like false advertisement and not having an employee handbook. The key is to do your research. Ultimately, that is what will protect you from a worst case scenario.