New York businesses should have written agreements with its shareholders, business partners, suppliers, vendors and even the customers. However, no matter how well your written New York business contracts are, it is nearly impossible to predict and control every risk. Here are five things you can implement right away to protect your New York business from being sued.
- Watch What You Say and Do. Public perception about your New York business is the reality. Business owners and their employees should avoid making any public disparaging comments or conducting its business in a questionable fashion. Although opinions are “as free as the wind,” making misleading or factually untrue statements could be deemed libelous or potentially slanderous. You should do due diligence on your business associates to avoid doing business with unscrupulous individuals. It is good practice to have a New York business lawyer help you prepare an employee handbook that includes proper employee conduct and also include a non-disparagement clause in your New York business contracts to prohibit the parties from making disparaging public statements about the other party (including on social media platforms).
- Hire a Competent Attorney. Consider engaging an experienced New York business lawyer — one who is familiar with the local laws and customs in the area in which your business operates and has expertise in a particular field, if necessary. Akin to the profession of medicine, doctors specialize on various parts of the body and/or ailments, the legal profession has lawyers who specialize on certain aspects of the law like litigation, patents, taxation, and immigration (to name a few). When you have a New York business lawyer on retainer for your business, although they might not have the requisite specialty experience, they should be able to anticipate and refer good legal specialists to hopefully avoid pitfalls in the future. Your New York business lawyer can advise you before you take an action—or to recommend the steps to take if you have been, or are threatened to be, sued.
- Separate Yourself From Your Business. Believe it or not, your New York business is not your alter-ego. It is a separate legal entity from the owners of the business. By incorporating your business (or forming a New York limited liability company), you can shield your personal assets from the liability of the business. Shareholders’ liability is generally limited to the capital invested in the business (with a few exceptions like if you operating the company in a fraudulent way or did not properly pay employees and remit state and federal taxes, for example).
- Insure the New York Business and its Operations. Almost every business should obtain general business liability insurance to cover the day-to-day perils of operating a business (for instance if a customer slips and falls in your premises). Also consider obtaining directors and officers (D&O) insurance to protect their personal assets from liability due to their acts and omissions. Also consider obtaining errors and omissions insurance (E&O) to protect the operations of the business in the event that a customer or client accuses the business of making an error or not performing their obligations under a New York business contract.
A great way to protect your business is to have thorough written contracts. A solid New York business contract should address liability, the shifting of certain risks between the parties, and also contemplate what happens if a force majeure event occurs. A force majeure is an event outside of the reasonable control of the parties that impedes a party’s obligations under the contract (such as an act of nature, an epidemic, shortages of supplies, or some other uncontrollable act which could delay or make it impossible for a party to perform).
- Protect Your Files and Business Data. This is just good business practice. You should protect your computer network and servers from outside threats, viruses and other malware that can cripple your business. Make system backups regularly using best practices and have a disaster recovery plan. Consider obtain ransomware insurance in the event hackers shut down your systems for ransom. Protect all passwords and also have strong confidentiality agreements with your employees to thwart someone from deciding to go “rogue.”
In conclusion, New York business owners are responsible for protecting their companies and their personal assets in the event of a lawsuit. It is best to speak with a New York business lawyer to review your business risks and help you implement the above steps as part of your company’s other best practices, in order to help protect your New York business from unwanted legal action.