Interview legally. Remember, under federal and state anti-discrimination laws, employers cannot discriminate against prospective employees on the basis of race, color, national origin, religion, sex, age or disability. Therefore, you may not ask interview questions designed to elicit information about an applicant's membership in one of the protected categories.

Select employees carefully. Hire people who are trustworthy, enthusiastic and mature. This can make all the difference in the world. Do as much research as you can on candidates; checking references is a must.

In the end, trust your instincts and don't hire someone if you have questions about integrity, ability or general approach.

Know your policies. Make sure you have a set of employment agreements and policies.

It's a good idea to have a confidentiality agreement if your business involves potential trade secrets. This will prevent former employees from taking business secrets to a competitor or from starting a competing business.

If appropriate, have employees sign a reasonable noncompetition agreement as well. Noncompetition agreements typically prevent an employee from working for a competitor or starting a competing business for a reasonable period of time after leaving the employer. Sometimes these agreements also prevent employees from contacting former clients.

You also need to have solid policies and procedures in place to handle employee terminations, complaints about co-workers and complaints about other matters, such as workplace safety.

Make sure you adopt and communicate reasonable policies on parental leave, sick leave, vacations and similar matters.

Most important, any agreements you use should be understandable, fair and legal. This will reassure your employees and help you avoid many potential pitfalls.

Consult with a lawyer when you hire your first employee and when issues come up that involve potential liability.

You don't need to spend a great deal of money — just enough to double-check with the lawyer on your potential liability or on steps to take to make sure things are set up correctly. For example, you might need to buy workers' compensation or unemployment compensation insurance.

While you can never prevent all problems, taking these steps may help reduce the likelihood of lawsuits and will help protect you if one is filed.