Your business is being sued: Here are 3 steps to take

It’s a litigious world, and a business can rarely avoid a lawsuit forever. Just the same, you already have a lot on your plate. As a small business owner, you can’t afford to make mistakes when you’re being sued.

What do you do now? Here are three things you should do:

Get organized and assess your risk.

Before you do anything else, it’s smart to get your paperwork in order and take stock of your situation. Do you know what kind of risk a lawsuit poses to you personally? If you’re a sole proprietor, for example, your risk is substantially higher than it would be if you had a limited liability corporation (LLC). You also want to take a good look at any contracts that might be involved in the lawsuit and evidence you have. That can help you better evaluate the strength of your position.

Find out what insurance coverage you have.

Some kinds of lawsuits may be covered under your company’s general liability insurance or your professional liability policy. If so, that may help you better afford your attorney’s fees, court costs and any settlement you’re ordered to pay. Inform your insurance provider about the lawsuit — but don’t assume you have coverage until you find out for certain.

Address the complaint within the deadline.

Ignoring a lawsuit exposes you to a summary judgment that will read as a loss. You don’t want to let that happen. You also should avoid trying to negotiate directly with the other party. (If they’d been willing to negotiate directly you probably wouldn’t be facing the lawsuit.) Instead, the wise move is to work with an experienced business attorney to decide how best to respond.

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