Lawsuits are costly, and no business owner in the right mind would allow their company to undergo the turmoil of litigation and lose thousands of dollars. Nonetheless, for most companies, lawsuits are the last thing on their mind.
Businesses are keener on increasing profit margins and improving their products or services. And when lawsuits come knocking on their door, it is just then that they think about measures to avoid future litigation.
Most businesses think they are immune to lawsuits. However, according to a survey by Statista, 27 percent of businesses worldwide reported that over 21 lawsuits were commenced against them in the last 12 months.
It only goes to show that the likelihood of your business being sued is far greater than you have imagined. However, this does not automatically mean that litigations are the answer for any business dispute.
Why Litigation Is Not Always the Answer
- It Is Expensive. The primary reason for not entering litigation is the costs involved. Civil lawsuits are plainly expensive. Apart from attorney fees, you need to think about other expenses, including the cost of obtaining depositions, filing fees, and expert witness fees.
- It Is Mentally Draining. Whether your company initiated the suit or not, litigation is mentally and emotionally taxing for anyone. You also need to work with your lawyers to build up the case and not rely on their expertise.
- It Puts You in a Bad Light. You cannot avoid the chances of your dirty laundry being aired out when getting involved in litigation. Before trial, parties have to undergo the process of discovery, and your opponent might uncover some information inimical to your business interest.
- It Does Not Guarantee Favorable Results. Though it may seem that you have a good case, there is no guarantee of winning a lawsuit. Sometimes opting for arbitration and mediation is a much better option than insisting that you are right.
Practical Solutions to Avoid Business Litigation
Draft Legal Contracts
No matter what size or shape your business is, you must have a lawyer who will draft legal contracts when entering an agreement or deal with a third-party company or independent contractor. The same thing goes when you hire an employee.
Incorporate Your Business
Separating your personal finances from that of your business helps a lot, especially when your company faces litigation. A sole proprietorship is risky as compared to a limited liability corporation. This prevents your assets from being held liable to pay company obligations, damages, and other litigation costs.
Insurance can’t help avoid liability, but it is a huge advantage when facing a lawsuit. The burden of litigation expenses is buffered when you get insurance for your business. It can cover legal fees and liability costs. Some policies even include protection against employee lawsuits and work-related injuries.
Hire an Experienced Lawyer
Having an experienced attorney familiar with local business laws on your side is crucial in avoiding costly business-related litigations. Your in-house counsels can advise you on actions to take before taking the matter to court. They could also guide you when litigations arise.
Establish Clear Company Policies
Seriously consider drafting office policies and procedures to help avoid litigations. With your company policies, you can instruct your employees on protecting company assets and intellectual properties. Provide an employee handbook and always emphasize these policies and procedures.
Keep Documents Recorded
Any business needs to keep accurate records of the time and date for any agreements signed. Minutes of any business transaction or meeting should also be recorded. The same goes for all communications ━ phone calls, emails, or in-person. Should any litigation arise, these documents come in handy.
Listen and Address Customer Complains
A small issue can quickly spin out of control, and before you know it, your company is facing a million-dollar lawsuit. Thus, tackle the problem before it escalates. Train your staff to provide excellent customer service and implement fast and accurate procedures for addressing any customer issues and concerns.
Adhere to Early Claim Investigation
Corporate lawyers agree that the core to a successful lawsuit avoidance is to implement early claim investigation. When your legal team gets involved during the early phase of the dispute, they can easily identify issues and implement procedures to protect the company’s rights and privileges.
There is no fool-proof way to avoid getting sued completely. Nonetheless, the above preventive measures can help reduce the risk and lead to a better chance of winning the case. By adhering to these tips, if your company will face litigation, you have a proper system in place.