Home Business Ideas and Opportunities

Legal Protection Tips for Your Home-Based Business

Legal Protection Tips for Your Home-Based BusinessHome-based business owners have to juggle many aspects to keep their business running. The last thing they need is to be faced with a lawsuit. However, in today’s litigious society, there is a high likelihood that either a customer or the federal authorities may threaten a home-based business with court action.

Looking at the reasons behind many such lawsuits, legal counselors have noted one key aspect: these lawsuits could have been prevented. In many situations, a simple misunderstanding can escalate beyond control; in others, failure to keep track of paperwork will result in a lawsuit. Such a legal action can potentially ruin your small business. Lawsuits are expensive and, even if you win, you would have spent lots of time preparing your defense and appearing in court, neglecting your business.

This is why today we will share some of the most effective ways in which you can protect your business from being sued. Please remember, though, that the advice included in this article does not represent legal counseling. Before taking any action, you should always seek advice from a licensed attorney.

1. Put Everything in Writing
Never engage in any activity on behalf of a customer without a written and signed agreement. This agreement should state clearly the scope of the services, the price, the duration of the agreement, the parties’ rights and obligations and the limit of liability. This agreement will be your strongest defense weapon if a customer tries to sue you for failure to perform the services adequately or if they refuse to pay for your services.

Agreements are also required by the law to justify billing your customers for services. This is why you should create and maintain a rigorous filing system and keep track of all the documents.

2. Keep Your Business Insured at All Times
Be very careful about your business insurance policies. Create alerts and reminders for renewing them. One single day when you are not covered by insurance is all it takes to be taken to court by a customer. If you receive customers in your house, to pick up their orders for example, you need a third party general liability insurance (for example, if a customer slips and falls on your property they can sue you for medical expenses).

If you provide consulting services, you should purchase insurance that protects you from errors and omissions in the advice you gave your customer. This insurance is called a professional liability policy.

3. Know the Laws in Your State
General business advice websites offer tips and advice encompassing a large spectrum of issues, but they rarely go in depth on a state by state basis. Therefore, reading advice on the type of licensing you need for your business should serve you as initial guidance. Your local city or county council office is the place you must go to in order to find out all the documents and permits you actually need.

4. Trademark Your Intellectual Property
Your unique business name, tag line, motto, and proprietary method of working belong to you in the eyes of the law only if you have a trademark over them. A copycat could steal your idea, trademark it and then legally prevent you from using it. It is one of those things which so few business owners remember to do and they end up being caught in legal battles and unable to prove that they are the originators of that idea. Yes, it costs some hundreds of dollars, but in the future your trademark may be worth millions. Protect it at all costs.

5. Keep Your Business and Personal Assets Separate
This is something we have advised before, and will keep doing so until no home-based business owner receives a single payment from customers into their personal accounts. For some people, it may seem more convenient to keep their money together. Or to buy a new computer for their business in their personal name. If you do not have a clear, traceable separation between what you, as a person, own and what your business owns, a judge could award your personal assets to a person suing you who wins the case in court.

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