Even Though They’re a Safeguard, LLC Litigation Happens – Here Are 5 Ways to Protect Yourself in Advance
There is nothing that can be done to stop people from filing a lawsuit against your company. However, there are plenty of steps you can take to protect your company from losing a potential case.
The good news is most of these steps are not generally hard to do but require the diligence to set up the right processes and stick to those processes. It is also important to have a team of the right professionals with experience in Arizona LLC litigation that understands the scope of the new LLC laws in this state.
Here are the five ways to protect your company in advance from potential LLC litigation in Arizona:
Work with an Experienced Team of Professionals
Working with an accountant, attorney, and consultants with experience in your industry is the best way to avoid lawsuits and many other common issues.
While many new business owners may be tempted to keep their costs down by setting everything up themselves, this approach will typically lead to more issues down the road.
Some businesses have limited resources and may not be able to afford hiring the best attorneys or accountants at the time of formation. But even if you are able to get your business started without the representation of an attorney or accountant, you should make it a priority to use a percentage of your initial revenue to hire this core team and have them review your current practices and contracts for any potential risks.
Get All LLC Contracts and Agreements in Writing
Whether you are working with family, friends or long-term trusted colleagues, get everything for your business in writing. This is just as important for internal operating agreements as it is for vendor and customer contracts.
New business owners might feel comfortable working off a handshake deal or might be hesitant to force new customers to sign a formal contract, but most verbal agreements create unnecessary risk for all parties. There is also potential for verbal agreements to lead to genuine confusion on all the details.
By putting agreements in writing, both parties have the opportunity to specify exactly what they want the agreement to cover or exclude. Additionally, by having a written agreement, both parties can refer to it down the road to refresh their memory on what terms they agreed to.
Putting everything in writing for your Arizona limited liability company helps avoid unnecessary risk and it helps new business owners avoid spending time on clearing up misunderstandings or settling disputes which will not help your company grow long term.
Establish the Needed Insurance Coverage for Your Arizona LLC
Seeking the advice of an experienced insurance broker on what insurance coverage your Arizona LLC should have is an essential step for long term protection. Even if resources are limited at first, you should find out what minimum coverage they recommend and make it a priority to establish that insurance coverage as soon as possible.
You should revisit the insurance needs and trends regularly as your company grows, starts hiring new employees or you explore any new revenue streams. There are many factors that determine what type and amount of insurance coverage is appropriate for your business. It can be too late to get the right insurance coverage if a lawsuit is filed against your company.
Separate All LLC and Personal Finances
One of the most essential practices to protect your personal finances from any lawsuits filed against your company is to keep all personal and business finances completely separate. Whether you have a single member LLC or multiple partners, you cannot use business accounts and credit cards for any personal expenses.
It can be easy for a new business owner to be somewhat lax on this essential step. Maybe it seems easier to simply put a few small purchases on your business debit card or you don’t always take the time to pay yourself formally. These simple slips almost immediately put your personal assets at risk of LLC litigation.
Keep Meticulous Records of Everything for Your Arizona LLC
As a business owner, one of the best ways you can protect yourself and your business is documenting as much as possible. Get into the habit of filing copies of invoices, expense reports, proposals, contracts, emails, letters and anything else that might be key to your operations. Many people balk at the idea of becoming an organizational expert because it is just not how they’ve done things.
By refusing to take these important organizational steps you will be substantially increasing your company’s exposure to risks. As an added benefit, these organizational practices will quickly start saving you time and energy on your daily operations. Imagine the benefits of knowing that all the key documents, records and information are exactly where they are supposed to be.
Now imagine the dread of finding out your company is being sued and realizing you do not have any of the key records available. Scrambling to find important records is not a recipe for success in any lawsuit or business endeavor.
Arizona LLC Attorneys
Whether you are exploring starting a new business or would like to review your current Arizona LLC, the attorneys at M&G Law can assist with all the details. Our firm has significant experience with establishing limited liability companies in Arizona.
Our experienced attorneys can make sure your company has all the necessary documents in place and set up as much legal protection against LLC litigation as possible. Contact us today at 602-562-7218 to schedule an initial consultation for your Arizona LLC or make an appointment on our contact us page.