Worried about getting sued? It’s a legitimate fear, and you might think that your first line of defense is to own your assets in judgment-proof entities.

That’s a valid and recommended strategy, but even though ownership is an important element of an effective asset protection plan, the best way to avoid paying judgments, along with substantial legal fees, is to avoid disputes and the often-resulting lawsuits.

Attorney Andrew A. Caffey offers step-by-step advice in Stay Out of Court! The Small Business Guide to Preventing Disputes and Avoiding Lawsuit Hell (Entrepreneur Press, 2005).

Caffey begins with a look at what he calls the civil lawsuit, sue-for-profit industry and its complex financial impact. He writes: “Business and professionals take the brunt of punishment in this out-of-control civil litigation game. The fear of being sued has invaded every aspect of our people’s lives.”

When negotiating, what is the best way to handle conflicts? When one party is under an impression that they feel is contrary to their best interest, how do you maintain the relationship and the good will between the two of you?

Depending upon the situation, you could be in for a tough time.

I recently found myself in a situation that put my skills to the test. I was accused by a business partner of neglecting a business situation. In one situation, he thought a client situation had not been addressed to his liking.

We had a discussion over the phone about how the situation came to be and who allowed it to get out of hand. Since both of us have very hectic schedules and travel a lot, we knew a face to face meeting could not be had. That in itself was a potential problem.

On the phone, we surmised how the situation came about and then I sought documentation to prove my point.