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Key Tips on How to Prevent Business Litigation

Not everyone can easily get out of a cushy 9-to-5 job to embark on a risky endeavour.

So if you’ve decided to say goodbye to your previous life as an office worker and hello to becoming your own boss by starting a business, you should congratulate yourself!

It might not be a good reason for you to celebrate, though, if a letter saying that someone has filed a lawsuit against your business makes its way to your desk. To prevent this from happening, here are some key tips on how you can avoid business litigation.

1. Put all business agreements in writing and let a lawyer review them

It can be rather tempting to conduct a business deal verbally and wrap it all up with a simple handshake, especially if you know the other party well. However, a verbal contract like that wouldn’t be honoured at all in court if the other party decides to file a lawsuit against your business.

  • Thus, no matter how big or small your dealings might be, you should set every business agreement that you make between you and the other party in writing so that you can both easily review it in case something comes up if there are any disagreements.
  • But to make the business agreement that you’ve made set in writing legally binding, you should have an attorney take a look at it so that they can point out anything in there that needs to be polished to make it look more professional and favorable for both you and the other party involved.
2. Keep abreast of any new laws in the state or country where you’ve decided to build your business

An activity that your business is doing may be legal today, but it could easily turn into a prohibited act once some legislation has suddenly outlawed it in the place where you’ve set up shop.

  • A new law introduced to the state or country where you’ve set up your business isn’t all bad news, though, if it has been drafted to give greater benefits to you and other businesses within the same line as yours.
  • It would certainly help for you to read the news as well as specially written articles relating to your chosen niche, so that you’re keeping up with the current trends and legal issues surrounding your business.
  • In case you encounter any legal jargon that leaves you confused – especially if you believe that it may have a huge impact on your business – you should consult your attorney about it so that they can explain it in layman’s terms to you.
3. Choose the people who you want to get involved in your business carefully

Whether a potential partner, customer, third-party vendor or employee, you want someone who’s trustworthy and reliable enough to do business with you.

  • You should thoroughly screen anyone who you want to do business with first, even if it takes a bit longer than simply involving them on the spot.
  • If the person that you’re supposed to enter into a business deal with has any previous history of getting into trouble themselves, you wouldn’t want to team up or hire them as they can have a negative impact on your business. Thus, it’s best to let go of them and find someone else instead.
4. Consider settling out of court if someone enters into a dispute with your business

Although you might have taken several steps to ensure that your business is litigation-proof, you never know when there might be a time when someone may launch a complaint against your business. But you don’t need to let it get to that awful stage where the business dispute between you and the complainant has to undergo a lengthy and expensive trial if you are able to settle outside the confines of a courtroom, either via mediation or arbitration.

  • Mediation involves only one person who acts as a neutral third party and tries to facilitate any discussion and negotiation that you and the complainant get into, though they can’t hand out a verdict regarding the dispute itself.
  • On the other hand, arbitration is almost the same as if the dispute had reached court-level since an arbitrator is allowed to make a decision concerning it.

No business is without its fair share of down moments. After all, it’s not all rainbows and money raining on you the minute you decide to start your own business. But out of all the risks that you could encounter as a business owner, the one risk that you don’t want to stumble upon is having a lawsuit filed against your business. According to a survey conducted in 2005, almost 90% of businesses find themselves having to deal with a lawsuit filed against them. You don’t want to be part of that alarming statistic at all, which is why you should start applying the above tips on how to prevent business litigation after you’re done reading this.

Disclaimer: The tips presented below on how you can prevent business litigation are for informational purposes only and isn’t meant to serve as expert legal advice. To learn more about preventing your business from having a lawsuit filed against it, you should call a licensed lawyer with enough experience in dealing with business litigation.

Written by:

Irene Wall has been writing about law for more than a decade. She writes pieces on various law topics that she hopes could help the common reader with their concerns. She enjoys playing basketball with her sons during her free time

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