To paraphrase a popular saying, "Lawsuits happen."
How you handle a sexual harassment complaint will make all the difference in the world should there be a suit.
As a management person in your firm, your decisions not only affect you, but all the other people in the firm, including its owners.
Follow these guidelines should you find yourself face to face with a sexual harassment issue.
Take it seriously. If a person is taking time to make a complaint, it's serious. Treat the person accordingly.
Call in the troops. If you have a Human Resources specialist on staff, go directly to that person to review company policies. If not, go to your managing partner to get outside counsel.
Just the facts ma'am. You are not the judge and jury. Don't make judgment calls such as, "I can't believe [the person charged] would do that." You are the collector of facts.
Shhhhh. Remember to keep your investigation confidential. Every manager doesn't need to know about the problem. Reputations can be ruined over false claims and the last thing you need is to complicate the matter with altered behavior toward the claimant.
Write it down. Write it down. Write it down. Is that clear enough? Document everything and include times and dates on your reports.
Reality check. Are you overreacting? Are you being helpful? Are you being the manager you need to be to the person sitting in front of you? Be assured that you can handle the situation.
Take responsibility. Take charge of the situation and don't pass the buck. Make sure that you follow the complaint through to the end. If the employee decides to stay, make sure s/he is comfortable in the work environment.
Review additional resource listings  on things to do to avoid sexual harassment in the workplace.