How Small Businesses Owners Can Guard Against Class Action Lawsuits

Many small businesses owners never assume they can become victims of a full class action lawsuit. However, it's possible for such a thing to happen. If you have a small business, understand that class actions do not only happen to large corporations. They can happen to you as well, and here's how you can protect yourself against them.

Understand what a Class Action Lawsuit Can do to Your Business

A class action lawsuit comes about because a group of people feels your business wronged, injured, or otherwise did them damage in some way. That group can consist of

  • your customers,
  • clients,
  • employees,
  • others you do business with,
  • those you perform a service for,
  • or those you sell a specific product to.

Occasionally, beating a class action lawsuit can still leave a small business floundering. It can cost a lot to fight it, and you can even end up liquidating your business just to beat back the class action. You can also sacrifice your reputation in the process of fighting a class action.

Consider Separating Your Personal Assets from Your Business

One way to protect yourself and give your business the best chance is by incorporating it. Many small businesses start as sole proprietorships or small partnerships. If that's the case, a class action lawsuit can claim your personal assets. By incorporating, you turn your business into an entity unto itself. This protects your assets by removing your personal liability.

Add or Upgrade Your Liability Insurance

Liability insurance can protect you and your business from various things. If you have no business insurance, then you should certainly pick some up, no matter the size of your business. If you only have very basic business insurance, it might not help you if a class action lawsuit comes your way.

Increasing your liability insurance can help to pay out a settlement if you lose a class action lawsuit. In addition, it can give you some defense protection or pay legal fees.

Make sure you pay attention to which kinds of lawsuits your business insurance can protect you from. If it doesn't include class action types, you should add some extra protection for that specific reason.

Speak to a Business Lawyer about Protecting Your Small Business

You should consult a business or commercial lawyer about any litigation that comes your way. A business law professional can help you formulate your defense and let you know how you can best protect yourself and your business.

You don't have to wait until there's a problem before you consult a business lawyer. Consider contacting one about how you can protect your business and mitigate the possibility of a lawsuit from the very start.