How To Protect Your Business From Legal Action

How To Protect Your Business From Legal Action

When you set up a business, there are so many things to think about. High on your list should be ensuring that your business is protected from common legal issues. Taking the time to get things right can prevent your company from being sued or becoming liable in a legal capacity. 

We’ve rounded up a list of the most common factors you need to think about to cover yourself legally. 

Structuring your business

Unless you’re setting up as a sole trader, then you’re going to want to put some thought into how you’re going to structure your business. By setting it up as its own legal entity, you can have a clear separation between yourself and your business when it comes to legal issues and tax. If other people are involved in setting up the business this is even more important. Knowing what rights and responsibilities everyone has the easiest way to sidestep. 

If you’re setting up in business with partners, having the right legal contracts in place can avoid a lot of litigation if someone wants to leave the business and the other partners can’t agree on a way forward. 

Buy the right insurance policies

Insurance can be a lifesaver for your business. Every business needs some type of insurance depending on the sector they operate in. Business insurance can protect your business and property financially if you experience damage or theft. 

In addition to protecting your business assets, there are other key insurance policies you need including professional indemnity insurance, which covers you against claims your business services have caused financial or reputational damage to another business. Some professions have their own types of insurance such as malpractice insurance for medical professionals or pharmacist liability insurance for those working in that area. 

If you run an office of a factory, you’ll also want insurance that covers you against injury to employees while on site. Insurance policies include legal support and financial cover if you are found liable. So if an employee successfully sues you for an injury sustained at work, then you won’t have to find the money yourself. 

Don’t just guess what insurance policies you need, consult a broker who will be able to advise you on the right amount of coverage and get you a good deal. If you work in a specialist industry, standard policies might not cover you, in which case you’ll be wasting your money on the insurance that isn’t going to be worth anything. 

Any agreement for goods and services should have its own written contract and terms and conditions. Having everything recorded in this way creates a legally binding contract that can be used in the event of any disagreements or litigation. Too many businesses have been caught out by this and risk building relationships on trust rather than a written contract.  You could be left in a financially vulnerable position if a client or supplier backs out of an agreement and you have no written contract with which to contest their actions. 

All business and supplier transactions should be covered by a written agreement. Don’t just download one from the web, have it customised to your specific business. 

Employment contracts

When you start to expand your company, you’ll need to hire employees. In order to protect your rights and theirs, you need written employment contracts in place. Setting out everything in a contract will allow you to hold an employee to their agreed responsibilities. If there is ever an issue with their behaviour or performance, then you have a contract in place with which disciplinary action or fire them. Without these contracts, it is difficult to exercise and legal authority over your employees when it comes to their roles and remuneration.

Health & Safety 

The owner of a business has a duty of care to follow any current health and safety regulations. Failure to do this can lead to accident and injury and the liability will lie with the company owner.

Ensure that you are up to date on the latest health and safety laws and if you aren’t sure what these are, then hire a consultant who will be able to get your health and safety policies. 

You’ll need to arrange for all employees to undergo health and safety training too. Making this part of ongoing employee development will reduce the number of incidences in the workplace and make it safer for everyone. 


Keeping accurate and up to date financial records is a legal requirement of any business. Failure to do so can get you into trouble with the authorities. Unless you’re running a very small company with few transactions, then you should use a professional bookkeeper or accountant to keep your financial data in order. You don’t necessarily need to hire someone in a full-time role, but just at key times of the year to prepare your accounts. 

Data collection 

There has been a worldwide crackdown on how businesses collect and use people’s personal data. Failure to stick to the rules can result in huge fines. Data may be collected through websites, advertising, social media, events and networking. 


Cyber attacks are becoming more common and it isn’t just big companies that are targeted. It is estimated that cyberattacks cost over a trillion dollars worldwide each year. This is an increase of over 50% on the 2018 figures. 

A cyber attack, even on a small business can have huge legal and financial consequences for your company. The COVID-19 pandemic has led to a huge increase in cybercrime as many people began working from home. The transition was the perfect time to take advantage of workers who weren’t used to this environment. 

The most common types of attacks include: 


This type of attack is also known as a social engineering attack. It uses convincing emails to encourage people to install malware on their systems or divulge sensitive information. 

The scams are increasingly sophisticated. Emails can look legitimate, coming from a source that you would ordinarily trust such as a supplier or customers. 


Ransomware is extremely profitable for hackers. It involves getting malware onto a system that then encrypts a company’s data refuse them access to it until they have paid money (often cryptocurrency). 

Supply chain attacks

Gaining in popularity, supply chain attacks target software. Once the source codes are accessed, malware can be distributed to other systems in the supply chain. 


Cybercriminals overload websites and systems with so much traffic that they can’t function properly. Clients and legitimate users are unable to access the site. Companies are required to pay money in order to get them to stop. 

Protecting your IT systems

IT security is important for the smooth running of your business that your IT systems are secure. Consult a professional IT consultant or IT company to audit your systems. They’ll be able to patch any holes and proactively monitor your systems for issues. Your employees will should be trained to follow good security rules and how to spot a cyber attack.

Backups of all of your business-critical systems and data will make you less vulnerable to a ransomware attack and you don’t need to pay to get the information back, just use your backups. 

Intellectual property

It’s not just your physical property that needs to be protected. You need to think about your intellectual property rights too. These laws are used to protect certain things that you create through your business. These include:

  • Brand names and slogans
  • Logos and customised fonts
  • Products and services
  • Design features

You can also trademark particular marks associated with your business or product in your business category. Using something that is similar to another trademarked product or service can leave you with a hefty legal bill. Similarly, you also want to prevent other people from using your trademarks too. 

Before you design any product or service, conduct a trademark search first to ensure you’re not using something too similar to someone else, even if it’s only a coincidence. You could be forced to pay a significant fine if you are found to have infringed a trademark. 

Seek out the right expertise

When you’re running a business, there is so much to do, you can’t be expected to become an expert in every area. In many important areas, you need to have the right level of expertise to advise you. If you try to do it yourself and miss something, then you are at risk legally.

Advisers and consultants you might want to consider are those with legal experitse. This can include a range of disciplines including company law, contract law and employment law. 

Other areas include finance, dealing with your accounts and taxes, HR support to advise on employees and IT to secure systems. 


Most businesses will face legal issues at some point but with a bit of planning and forethought, you can avoid any unnecessary legal issues that could otherwise have been dealt with. After all, how would your company cope if they were suddenly fined or forced to enter into litigation? 

About the author


Jitender Sharma

Publisher on Google News and Founder of The Next Hint, Inc. Spent 40,000 hours in Business development and Content Creation. Expert in optimizing websites according to google updates and providing a solution-based approach to rank websites on the Internet. My aspirations are to help people build a business while I'm also open to learning and imparting knowledge. Passionate about marketing and inspired to find new ways to create captivating content.
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