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Shore Up the Banks: 5 Things That Can Keep You from Getting Sued

Reviewed by Ty Crandall

November 13, 2023
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Do you sometimes wonder if anything can keep you from getting sued.  In this world we live in, it seems that people sue for anything and everything.  The truth is, all you can do is your part.  You can only control yourself, and that means working hard to shore up the banks so that there is as little risk as possible of being sued.

Save Yourself from a Legal Flood

Legal woes have been the end of many a small business, sometimes even before they get started. People will sue for literally anything. They don’t like the color of your building. The product you sell or the service you offer offends them. It smells funny in your store.

Seriously, these days people will try it all. So what can keep you from getting sued? Nothing is for certain, but we have some tips that may help. 

While most of these will never make it to court, there are some serious legal concerns out there. If someone sues you because they feel you have violated a copyright, are responsible for an injury, or that discrimination was an issue, you could have a real problem.

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Why Worry?

Why should you worry about someone suing you? It may seem obvious, but just in case you are not sure of the kind of damage a lawsuit can inflict, let me lay it out for you.

A lawsuit, like a flood, can annihilate your business. Even if you end up winning, the domino effect that ensues can be enough to put you under. Aside from the financial hardship, you can suffer lasting damage to both your business and personal reputation that the business cannot overcome.

Even if your business survives, there can be fallout that you may not expect.  For example, the fundability of your business may suffer. There are over 100 factors that affect fundability, and information from various data agencies are included.  If you have a lawsuit on your record, lenders may see it.

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Can You Be Sued Even if You Do Nothing Wrong?

This can be the case even if you do nothing wrong. Consider the sad tale of Mom and Pop shop. Mom and Pop shop was doing great in the community and had tons of support, until one unhappy customer swore a burger made them sick.

The complainant ended up in the hospital, and the doctors told them it could be food poisoning, or it could be a bug. They were running tests to confirm. Convinced it was the burger, the ill customer filed a lawsuit against mom and pop.

The local paper ran the story and the whole town was talking. At court, it came out that a few days after the episode, test results showed that the customer indeed had a bug and it was not, in fact, the burger that made him sick. The judge ruled a dismissal. However, the damage was already done.

And then…

Mom and Pop couldn’t afford an attorney to start with, but they had to get one. Even though, per the test results,  it was not the food that made the customer sick, the town couldn’t seem to get over the idea. Some customers came back, but many still shied away.

That guy was really sick after all.

Between the reduction in business and the attorney fees, Mom and Pop couldn’t get their heads back above water. They sank, the business tanked, and they had to close up the shop.

While this sob story is a little simplistic, it gets the point across. You don’t want someone suing you.

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My Business Isn’t the Type that That Someone Would Sue

What’s that you say? Oh, you think because you don’t really do anything that would lend itself to the common reasons people sue businesses that it can’t happen to you. That is, unfortunately, not true. Any business is vulnerable at any time.

Even if you have minimal contact with the public, you would not believe what people can find to sue for.

5 Things You Can Do to Keep You from Getting Sued

1. Incorporate

This is the number one thing you can do to protect yourself. They can sue your business, but if you incorporate, it is harder for someone to go after your personal assets. This is the best way for you to keep your home, car, and retirement funds.

This is vital, because if you do not incorporate, anyone suing your business and winning can go after you personally as well. If you are a corporation, your business is a totally separate entity.

Incorporating offers a lot of other benefits as well, including making it easier for your business to build credit based on EIN rather than you having to use your personal credit that is attached to your SSN. In fact, this is one step in building a fundable foundation.

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2. Have Integrity.

Most business owners do not set out to be shady, but sometimes lines get blurred. It can be a slow fade into the gray when it comes to making questionable business decision. Here are some things to look out for.

Don’t fall into the trap of sacrificing quality for money. It will only backfire. Even if it seems to pay off at first, it won’t last. Consider the following examples. They may not all be obvious.

You want to clear more profit, so you choose to buy cheaper ingredients for your homemade desserts and continue to charge the same price. Customers keep buying at the same level for a while, but they quickly notice the change in taste and are not impressed.

Eventually they stop buying because they are only disappointed. One of your last few loyal customers actually got sick from the lower  quality product.

You want to be able to seat more customers, but you don’t want to spend the money to enlarge your seating area. Instead, you cram in more tables. It looks like it will be great, but customers quickly realize the new cramped seating is uncomfortable.

Servers are also having a hard time getting between tables and there are noticeably more accidents. One customer even slipped in a spill  due to a server bumping into chairs that were too close together.

You get the picture. It’s not worth it. Keep providing your customers with the best possible products and services. You won’t be sorry.

Follow the Rules.

The rules vary from business to business, but if you do not follow them, you leave yourself open to legal worries. If you run a passenger boat, make sure you have the right number of life jackets on board and that customers wear them.

If you own a nightclub or other establishment, pay attention to fire codes. Don’t give in to the temptation to let more in just to make more money. If there is a fire and you are out of code, anyone who sustains an injury can sue you.

A tragic example of this is the fire at The Station nightclub several years back. After that, the codes got even tighter, so pay attention. They are there to protect people but they can also keep you from getting sued.

Watch What You Say.

Never say anything off color, even in jest. Even if you think it is just you and your most trusted compadres that can hear it. You never know who will hear, who will talk, or who is recording. One careless remark has hurt many business owners.

Paula Deen comes to mind. The television chef lost a huge contract with Walmart over a careless racist comment made years before.  

More recently, Roseanne Barr was fired from her own show, and Papa John’s found John Schnatter has to leave the company he started.  It’s really best to just not. If in doubt, keep your mouth shut!

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If you fire someone, be sure your cause is understandable. Know what you can ask and what you cannot ask in an interview. If you refuse to serve someone or to do business with someone, don’t do it for questionable reasons.

3. Hire competent professionals.

You don’t want a chef that doesn’t wash their hands. A nail tech that doesn’t know what she is doing can cause a lot of damage for sure. If you run a medical facility, you want to be sure your nurses and assistants know how to perform their duties safely.

4. Run a background check.

Make sure you background check your employees. You don’t want to hire a child care worker who has an abuse complaint. It would be awful to hire an accountant that has a history of skimming money. Do your due diligence. 

5. Buy insurance.

Liability insurance is a must. If you have insurance then you can help cover medical expenses. So this is for anyone who may get hurt, or ill, as a result of your business.

While this may not keep you from getting sued, it can sure act as a life preserver in the midst of the roaring waters. In some cases, if you can file a claim and provide the injured party with the help they need financially, you can still avoid a lawsuit.

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A Note About High Risk Businesses

If you are in a particularly risky business, such as one that offers extreme sports or investments, you may want to look into hiring a risk mitigation consultant. This is great for any business, but most smaller businesses would not be able to afford it.

Those businesses that are particularly high risk, however, may find the benefits far outweigh the cost. This type of consultant can help you evaluate every aspect of your business and make changes that can reduce risk to your customers, therefore reducing the risk of lawsuits.

Some changes may include upgrades to facilities, higher quality equipment, and regular equipment quality evaluations. Examples of high risk businesses include:

  • The aforementioned extreme sports options
  • Anything that has to do with kids
  • Anything that has to do with money
  • Airports
  • Commercial bus lines
  • Uber/Lyft

While this is not an exhaustive list, it gives you the idea. Anything that involves transportation, children, or money management is high risk.

We Want to Keep You From Getting Sued, But You Need to Do Your Part

There is always the chance that someone looking for a reason to sue will find a reason, regardless of how careful you are. Some people are just out for it.

Even if you do everything right, there are those that will even make up a reason. They will find a tone, an inflection, or a hidden danger even if only imagined.

If you are careful and follow these tips, however, it can help keep you from getting sued. Even if someone tries, if you have these procedures in place it is likely they will not succeed.

Sort of like shoring up the banks with sand bags. The river may overflow, but the preparation you have made will soak up the waters for a while. You are at least mitigating risk as much as possible

What frustrates you the most about preventing lawsuits? We’re trying to keep you from getting sued, but did we miss something? Let us know in the comments.

About the author 

Faith Stewart

Faith has a BBA with a major in Accounting, and a combined 20 years of experience in the fields of finance and account.

Before switching to writing, she spent 10 years working in various areas of small business and personal finance and accounting, including working as a public auditor at BKD, LLP, Financial Director at Central Arkansas Development Council, and Commercial Credit Analyst at Farmer's Bank and Trust.

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