Four Laws that Protect a Business during a Lawsuit

Facing a lawsuit as a business can be scary, especially if you fear you lack the resources and assets for compensation. However, there are certain business laws in place that protect you as the business owner and your company in general through a lawsuit. If you are ever presented with a lawsuit, the first step before talking to anybody is retaining a lawyer. They will guide you step-by-step through the process and offer advice on how your case would be best handled. If you don’t already have a relationship with a lawyer for your business, it’s best to find one who specializes in your type of business and has handled business lawsuits before. Besides having a lawyer in your corner, here are four laws that can protect your business in a lawsuit.

  1. Wage and hour laws. Not only do these laws protect employees from being overworked and unfairly paid, but they also protect businesses from employees claiming unfairness and demanding compensation above the standard amount. As long as accurate records were kept by the business, the wage and hours standards serve as a boundary between employee and employer. Furthermore, if a former employee tries to claim unemployment, which would cause your unemployment insurance to increase, there are limitations in place stating they must have worked for your company a minimum of four quarters and that their departure fell under the acceptable reasons to qualify for unemployment.
  • Statute of limitations. Luckily for businesses, there is a statute of limitations on how long a plaintiff has to file a case. In Connecticut, most limitations are within two to six years depending on the nature of the case. Even if your business has dissolved, a person can still sue within that statute of limitations range, so it is wise to keep an amount in withholdings as a security measure against such an attack. If your business was bought by another company, most of the time the other company will be responsible for all current and future compensation claims.
  • Law-binding contracts. Obviously, any official contract associated with your business is legally binding, which can protect you and your business as long as the contract is properly worded and you delivered on your promises. To be considered official, a contract must include an offer that all parties have agreed upon and an exchange of something valuable from both sides. For example, one side provides a service and the other pays them for that service. Contracts don’t require a minimum length, but the more specific and detailed it is, the more airtight your case will be should anybody claim terms of the contract were violated.
  • LLC or corporation. Establishing your business as an LLC or corporation greatly reduces your risk of personal liability in the event that the business fails or your business is faced with a lawsuit. As an LLC or corporation, only the business assets are at risk instead of your own savings, home, or other personal assets. Of course, there are exceptions to this protection such as if you personally acted negligently or criminally while on the clock, if you used personal funds to pay for business expenses, or you don’t keep your business in compliance with LLC or corporation laws.

Protecting yourself in these ways are important first steps, but they should always be followed up with a constant vigilance and basic understanding of the laws surrounding your business. Talking with a lawyer during the initial set-up of your business is the best way to prevent major mishaps, but it is never too late to seek legal advice in your business venture.