Chapter 3: How to Avoid Lawsuits from Small Business Clients
Here's a conundrum: with every client comes the risk of a lawsuit if something goes wrong. At the same time, you need clients to keep your business afloat. The best you can do to minimize your risk is to get familiar with the incidents that trigger lawsuits and avoid them accordingly.
For starters, professional liability (in the form of costly mistakes or unwise financial decisions in an advisor role) is generally the largest exposure to contend with, but personal injury, libel, and property damage could all be cause for suits. Small-business owners who have a lot to lose may be especially likely to sue if they feel that their accountant's mistakes cost them financially. Even defending against a frivolous lawsuit can cost up to $5,000, according to <a title="Tort Liability Costs
for Small Business" href="http://ilr.iwssites.com/uploads/sites/1/ilr_small_business_2010_0.pdf" target="_blank">research by the US Chamber Institute for Legal Reform [PDF]. And that's if you've done nothing wrong.
As you grow your accounting business and take on more small business clients, it's essential to keep disputes from spilling over into the courtroom. Let's explore some ways to avoid common mistakes and oversights that lead to lawsuits.
Frivolous lawsuits cost $2,000 - $5,000 in legal fees.
Next: Part 1: Avoiding Lawsuits by Communicating Clearly with Clients