Nothing opens up a small business to financial disaster more than a lawsuit. Litigation, or even the threat of litigation, is costly and can cause significant stress that limits your ability to run your business effectively. Here are a few ways to protect your small business from potential lawsuits.

Speak with your attorney

It can be difficult for a layman to assess the various legal risks of running a small business. Always discuss the legal risks and responsibilities of hiring employees with your attorney. This can help to protect you from suits related to wrongful termination, discrimination and sexual harassment.

Entrepreneurs should speak with an attorney about intellectual property, as they could end up as the defendant or plaintiff in such a lawsuit. A good attorney will also assist you in putting a document retention policy in place.

Monitor contracts

Small business owner can be held legally accountable for violating binding contracts with clients or vendors. This includes non-disclosure agreements or service agreements. Always take time to closely monitor contracts and to make sure you’re following all requirements. Educate new employees about the legal requirements related to their position and responsibilities.

Educate yourself

You don’t need to become a legal expert—that’s why you have an attorney—but it’s worth learning the fundamentals of relevant business laws. Stay up to date on employment and labor law, intellectual property laws, marketing and advertising laws, financial laws and anything that might be related to your particular field.

Purchase the proper insurance policies

Insurance is the best way to protect a small business against lawsuits. Every New Jersey business should carry general liability insurance, which covers “slip-and-fall” cases for employees and visitors, as well as company policy and product liability insurance, which covers you if a customer claims to have been injured by your products. Auto liability insurance is necessary if you have company vehicles or an employee’s car is being used for company purchases. A quality worker’s compensation insurance policy will cover costs due to injuries on the job, illnesses, lost wages and medical expenses.

Home-based businesses may require additional insurance policies. This includes business owner’s policies, which is the most inclusive insurance policy for a home-based business. It includes property and liability insurance to protect you against theft or product liability.

To make sure your small business is fully protected from potential lawsuits, consult an expert at John B. Wright Insurance about the type of policy that is right for you and your small business.