How to Protect Your Draper Utah Business from Lawsuits
As a business owner, you likely take all the necessary steps to minimize legal risks and avoid disputes. However, not every situation can be predicted, including the chance that you could face a lawsuit. If your business gets sued, you are also at risk of losing your personal assets. Depending on the type of business, you might be personally liable for the company’s debts and could be required to pay creditors from your own assets.
Fortunately, there are proactive measures you can take now to safeguard your business from potential lawsuits in the future. Here are five key steps you can take to protect your business from litigation.
Consider Your Business Structure
When you run a business as a sole proprietorship, you and your business are legally considered the same. This means if your business gets sued, your personal assets, like your house or car, could be at risk because they are tied to the business.
To avoid personal liability, one option is to have a trust own your business. A trust is a separate legal entity that can own things like property or businesses. If your business gets sued and it’s owned by a trust, only the assets within the trust would be at risk, not your personal belongings.
Another option is to form a Limited Liability Company (LLC) or an S Corporation. These business structures separate your personal assets from your business’s liabilities. In other words, if your business gets sued, your personal assets are protected. However, setting up and managing an LLC or Corporation is more complicated and costly than a sole proprietorship.
In short, using a trust or forming an LLC or a Corporation helps shield your personal assets from any legal issues your business may face.
Read my article to learn how to convert your sole proprietorship to an LLC.
Avoid breach of contract
Disagreements can arise with vendors, customers, landlords, or business partners, leading to a breach of contract. A breach can occur in several ways, such as:
- Failing to meet contract deadlines.
- Not paying when the contract is completed.
- Not delivering goods or services as specified in the contract.
- Incomplete work under the terms of the contract.
There are two types of breaches:
- Anticipatory Breach: This is when a party clearly says they will not fulfill the contract obligations. For example, they may tell you in advance that they won’t be able to deliver what’s promised.
- Actual Breach: This happens when a party fails to fulfill their obligations at the time they were supposed to without any prior indication or notice.
Either type of breach can lead to a lawsuit against your business. Having an experienced business attorney review your contracts and including dispute resolution clauses can also help mitigate risks. Additionally, maintaining open communication with all parties involved can prevent misunderstandings that could lead to a breach.
Learn how to draft an airtight business agreement in Utah to minimize contract disputes.
Register Intellectual property rights
Intellectual property rights are violated when someone uses, copies, or exploits a protected work without obtaining the necessary permission from the rightful owner. To protect your business from intellectual property (IP) lawsuits:
Always ask for permission before using someone else’s work, whether it’s a picture, song, logo, or any other content. If it’s protected by copyright, trademark, or patent, make sure you have a license or written consent.
Protect your own inventions, logos, and creative works by registering your patents, copyrights, and trademarks. This makes it easier to prove ownership if someone uses your work without permission.
If you have a unique brand name, logo, or symbol, register it as a trademark. This stops others from using a similar name or logo that could mislead customers.
Use non-disclosure agreements (NDAs) with employees or contractors who have access to confidential information.
Protect Your Business From Lawsuits with a Watts Law Business Attorney in Draper, Utah
At Watts Law, I have serving the Draper business community for 20 years as an experienced business attorney. Call me today at (801) 630-8309 to schedule a free consultation.