5 Legal Actions That Will Make Sure Your Business Is Protected

Legal Actions - Business Protected

Starting a new business is both exciting and incredibly intimidating. There are a lot of things that can go wrong, and if your assets are tied up in the business, you could be legally and financially responsible. So, you must ensure that your business is legally protected.

Fortunately, there are several legal actions you can take to help protect your business. We discuss five important ones to start with below.

1. Separate Yourself From Your Business

One of the easiest business formats to operate is a sole proprietorship – but it’s also one of the riskiest. This is because you are personally liable for any debts your business incurs. For example, if your company owes money to a creditor and can’t pay it, the creditor can come after you personally for the money.

Open A Trust

An effective way to add a layer of protection between your personal and business assets is a business trust, which means opening a trust and having the trust own the business. Trusts are their own legal entities that can buy and sell property, operate a company, and file a tax return. If a trust owns your business and your company goes bankrupt, only the assets attached to the trust can be liquidated to pay the debt.

Incorporate Your Business

You don’t have to have a large company with a lot of employees to become a corporation. Sole proprietorships are always unincorporated, but you can become the single owner of an LLC and then incorporate that. Even though corporations have more legal requirements than sole proprietorships or LLCs, the protection they provide your personal assets is arguably well worth it. 

2. Obtain Liability Insurance

Another important step to take to protect your new business is obtaining liability insurance. This type of coverage protects you from claims against your company for injury and negligence. Unfortunately, there’s little you can do to avoid these claims entirely. They can come up in the course of doing normal business, so it’s crucial to have insurance coverage that can absorb the cost of any successful claims. Otherwise, you will be financially responsible.

There are several different types of liability insurance to consider depending on the type of business you run, such as:

General liability insurance.

General liability insurance, also called commercial liability insurance, is the most comprehensive type of business coverage. It includes protection against claims for injuries to customers, property damage caused by staff, and other general claims.

Business liability insurance.

Business liability insurance is similar to general liability coverage, but also includes protection against product recalls and defects.

Workers’ compensation insurance.

Workers’ comp insurance protects your business from claims made by injured employees. It covers the cost of employee medical bills and wage replacement until the employee can go back to work or has reached maximum medical improvement. 

Product liability insurance.

Product liability coverage protects your company from claims made by customers for defective products. Many general liability policies cover product claims, but purchasing additional insurance can be helpful for businesses that manufacture medical devices, chemicals, and other potentially dangerous products.

Malpractice insurance.

If you’re a medical professional or your business employs them, you will need malpractice insurance. This coverage protects you and your company from claims of medical negligence that resulted in illness or injury.

Umbrella insurance.

Umbrella insurance provides protection against catastrophic injuries, death, and high-value liability claims. Generally, this insurance is only triggered when a covered claim exceeds the limits of other active policies. 

5 Legal Actions to Ensure Your Business Is Protected

3. Use The Right Agreements

Throughout the course of doing business, you will need several agreements and contracts between your company, vendors, employees, partners, etc.

This includes but isn’t limited to:

  • Non-disclosure agreements
  • Non-compete agreements
  • Vendor service agreements
  • Employment contracts
  • Partnership agreements

If you have partners in your business, you’ll need to have a written agreement that details the roles of each person, their responsibilities, and how the business will operate and grow. For an LLC, this is called an operating agreement, but for corporations, it’s referred to as the company’s bylaws.

These various contracts are the backbone of how your company operates, so each one needs to be detailed, thorough, and in the best interests of your business.

Here are some tips on what to include in your agreements and what to do once they’re signed:

  • The scope of the agreement. Outline exactly what the agreement is for, what each person agrees to, and any deliverables to be provided. 
  • The agreement timeframe. Include how long the project, employment period, or business relationship is expected to last and when each deliverable is due. Note any terms regarding late work or deadline extensions as well.  
  • Payment terms, if applicable. If the agreement involves payment from one party to another, make sure the terms are as thorough as possible. Include how much the payment(s) are for, how often they occur, and other critical information about the financial relationship between all parties involved.
  • How the contract can be terminated. The agreement should also document how the contract can be terminated or under what terms the agreement is considered void. Be as specific as possible here so there’s no room for ambiguity. 
  • What happens if one or more parties fail to meet their contractual obligations. Include what will take place if someone neglects to satisfy their end of the contract, such as late payment fees, forfeiture of a deposit, etc.

Essentially, you should include everything in your agreements that you want to be legally enforceable. The more comprehensive a contract is, the better your chances are of it being held up in court should the need arise.

4. Protect Your Data 

The majority of businesses today use computers, smartphones, and other digital devices for their daily operations. This puts your critical data, including financial records, intellectual property, and customer data at risk without adequate protection.

Here are some basic things you can do to protect your company’s digital information:

  • Install antivirus and security software. Make sure your computers and other network-connected devices have the latest antivirus and security software installed. Hackers can easily slip in between lapses in software updates.  
  • Train employees to spot suspicious activity. Host regular education seminars or provide training materials that help employees learn about how to identify problematic user behavior. Employees should know how to avoid common tactics used by scammers, like phishing emails. 
  • Update passwords and use two-factor authentication. Make sure you and your staff are regularly updating your passwords using long, complex words or phrases. You should also be using two-factor authentication wherever possible to ensure only authorized users are able to access your company’s important data.  
  • Work with an IT managed services provider. Many businesses work with an IT managed services provider who installs security software, monitors the network, and helps with data recovery in the event of a breach. This allows you to make sure your business has the protection it needs without having to oversee granular technical issues.   

Finally, it’s imperative to consult an experienced business law firm before investing too much of your time or too many resources in getting everything started. How you initially set up your company plays a significant role in your ability to operate successfully, and there are many things you can’t go back and adjust later on.

Working with a qualified business lawyer can help you better understand the laws and regulations your company is required to operate under. Depending on your industry and the products or services you provide, your attorney can help your company remain compliant with government guidelines and make sure you have the right insurance coverage.

Your lawyer can also:

  • Help you choose the right business structure
  • Help you register your intellectual property
  • Assist you with trademarking and patenting 
  • Help you obtain the necessary licenses or permits
  • Draft contracts and agreements for various business relationships
  • Manage contract disputes and breaches of contract
  • Coordinate mergers and acquisitions
  • Help you with business real estate transactions
  • Handle employee relations issues
  • Assist you with filing local, state, and federal taxes
  • Help with managing business debt and if necessary, filing for bankruptcy
  • Negotiate settlements with insurance companies on your company’s behalf
  • Represent your business in court during litigation


Protecting your business from lawsuits, disgruntled employees, noncompliance fees, and other serious issues is crucial to its success. The above tips are just a start. Working with a qualified business law firm helps you make sure your venture is poised for growth.