The American culture is a litigious one, and anyone running a business needs be proactive about possible lawsuits. Successful businesses are targets for those with valid complaints and for those looking to make a quick dollar. Before you fall victim to legal action, take a few sensible precautions. 

Minimize Your Exposure

Stay away from sole proprietorship. Structuring your company as an LLC or S-Corp will protect you individually from the financial strain of lawsuits and their awards but many small business owners choose sole proprietorship's instead. They are popular because they are the easiest way to establish your business and often only require a permit and registration with your local government to get started. You can report your business profits through a personal tax return instead of filing a separate business form, and you have complete flexibility on your hours. You can also open or close a business very quickly and with little trouble. Basically, you and your business are the same entity. You get all the profits and pay all the bills. However, you are less vulnerable to lawsuits if you incorporate. Being an LLC or S-Corp means that a judgment against your business will not touch your personal assets. You and the business are not the same entity, so you have legal protection and will not lose your home and your savings if someone sues you and wins. 

Find an Attorney

Before you even open the doors of you business, interview attorneys. Having a good business law professional in the wings can save you much grief if you are sued, and you probably will be. On average, a small business earning one million dollars per year will spend $20,000 on lawsuits. If possible, hire a local attorney who is familiar with the area's customs and most importantly, the local court system. Insiders know best how to work with the local legal system, which gives you a better chance at success. Also, your lawyer can advise you if settling the lawsuit out of court is to your advantage.

If you have a successful business, you will likely be sued at some point. Protecting your assets by incorporating your business and by having excellent legal representation will do much to limit your personal exposure and to keep your business safe from crushing monetary judgments. Being prepared for lawsuits is a necessary part of running a small business these days, so take these precautions and then get to work making your business successful.