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Top Tips to Protect Your Small Business from Lawsuits

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Knowing how to protect your small business from lawsuits is essential in turning your business into a successful enterprise. There are a number of things to consider doing or not doing which can be potentially disastrous for your business. Knowing what to do and what to avoid will ensure financial success for you and your small business.

Here are our top tips on how to protect your small business from lawsuits.

General “Housekeeping”

Always be professional when conducting your business. Think before you speak or act as any negative statements, especially to customers, may lead to expensive lawsuits, or poor advice given could get you into trouble

Naturally, do not engage in any unlawful business practices. Keep away from doing businesses with unethical people.

Stick to facts and not emotion to deal with problems is a good example to your employees. Invest in training and educating your employees as they are one of your major assets that can mitigate problems with customers. Educate and train your customers as the majority of problems are misunderstandings.

Learn about business and tax laws

Having adequate information about business and tax laws concerning your business will help to protect your small business from lawsuits. Knowledge is power, so arm yourself with the latest tax laws, employment and labour laws, marketing and advertising laws, etc. by working with professionals such as a Chan & Naylor Accountant.


Consider getting business and/or personal liability insurance. There are several types of insurances you require in business. Professional Indemnity, business insurance, Equipment, cybersecurity, life insurance, income protection, Directors protection, etc. are some of the insurances out there.

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Since all businesses are different, namely, some are sole traders and others employ staff, etc. their needs are all different. So speak to your insurance agent or Chan & Naylor Wealth Planning to determine the type of liability insurance is appropriate for you and your business.

Proper Structuring of Your Business

Whilst a sole trader is simple and cost-effective, the downside is that all your assets, such as your family home, are exposed to litigation. All you need in a disgruntled customer or employee to sue you and all your assets, including those that are not even used in your business such as your family home, investment properties, shares or cars, furniture, and everything in your name, is now at risk.

It’s always best to have your high-risk assets (such as your business) held in a separate entity to your personal assets, which are low-risk, so in the event something happens, you have quarantined the high-risk assets away from the personal or low-risk assets.

To determine the right entity as there are many different entities that are suited for different circumstances, its best to see your Chan & Naylor Accountant who specializes in setting you up correctly as it’s a very costly exercise to attempt to fix it after the event.

For example, there are types of Companies and many different types of Trusts, and they are all used for different purposes. A simple example is you would never use a Family Trust to hold a negatively geared property in. You would use a Property Investors Trust. It may not be appropriate to hold a business in a Company as a Company loses out on the 50% exemption for capital gains tax.

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Please see a professional accountant such as your Chan & Naylor Accountant who is trained in this area.

It’s always best to prevent problems from happening rather than reacting to them.

Not only is it cheaper, but emotionally, it’s less taxing, and it’s better to spend your time on productive activities such as growing your business rather than wasting time in court defending an action that could have been prevented from occurring in the first place.

If you liked our “Top Tips to Protect Your Small Business from Lawsuits” post, subscribe to our newsletter and stay in touch with us on Facebook, Instagram, and Twitter.

Aside from protecting your business, have a look at our other accounting and advisory services that we do to help you achieve greater success.

Chan & Naylor Group has national offices in North Sydney, South West Sydney, Sydney, Pymble and Parramatta in New South Wales, Melbourne, Moonee Ponds and Hawthorn in Victoria, Brisbane and Capalaba in Queensland, and East Perth in Western Australia that can assist you with protecting your business as well as any property tax or business tax enquiry that you may have. Contact us today.


Photo: Stock Photo Secrets

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