The impact of litigation on small businesses in California is by no means minimal. It not only costs business owners money and time; it also impacts and changes the way they do business. While litigation is often necessary for businesses to move forward from a dispute or liability case, it can be devastating. The most effective way to avoid the worst consequences of litigation is to ensure that your business lawyer is skilled and experienced with similar cases.

How Does Litigation Impact Small Businesses in California?

Small business owners are typically personally and professionally invested in their operations, and the financial loss due to legal fees, negotiations and settlements, and loss of income and damages, coupled with the mental taxation of a court case, can seriously impact the future of their company or firm.

Many small business owners will try everything possible to settle their case prior to trial. They believe negotiations and settlements are preferable to going to court, but unfortunately, more often than not, the opposing party will refuse to negotiate.

Small business owners are already extremely busy without the financial and emotional hardship of litigation. If someone brings a claim against you, it not only threatens your reputation and distracts you from your duties as an employer and business owner, but it can put everything you have worked hard for at risk.

Even if your business is doing well financially and has a solid customer base, an excellent reputation with clients and community members, and incredible employees, getting sued by someone can bring that to a screeching halt. You know the pressures of building and operating a small business, and the threat of court should not destroy your life’s work. Hiring a qualified lawyer can mean the difference between continued success and closing your business.

How Much Can Litigation Cost a Small Business?

With legal costs for litigation ranging from $3,000 to $150,000, small business owners feel this hardship keenly and may feel forced to recoup their losses by cutting operating expenses, laying off employees, attempting to attract new customers, and expanding services to their existing clients.

Small businesses are not able to simply raise their prices, as they are already competing with multi-million-dollar corporations and the need to maintain both a competitive advantage as well as their reputation in the community.

Small business owners faced with litigation often have to use business assets to pay the damages. Insurance may cover certain damages, such as employee complaints, but nonetheless, many small business owners face potentially losing their business for good.

If they are able to survive paying off damages, it can take quite a long time to rebuild their business and recoup the financial losses. Moreover, the impact of litigation takes a toll on the level of trust they feel toward employees, customers, and community members.

Hiring a qualified business attorney may seem like just another expense, but in reality, you need a defense that can mitigate your liability and reduce the damages you pay. Not hiring a skilled lawyer can lead to even more expenses in the long run.

FAQs

Q: How Does Litigation Impact Small Business?

A: It is not uncommon for small business owners to face the threat of litigation, which can include the following:

  • Expensive legal damages
  • Harm to your reputation
  • Negative reviews online
  • Negative publicity in local/national media
  • Excessive stress on you and your employees
  • The potential to lose your business

Small businesses, unlike large corporations, do not have the budget for in-house counsel. Small business owners do not have the luxury to pay off damages and negotiate settlements whenever they happen.

Q: How Do I Protect My Small Business From Lawsuits?

A: It’s beneficial to prepare for the possibility of a lawsuit. Consider the following tips:

  • Incorporate as a limited liability company (LLC), so there is legal separation between business and personal assets.
  • Maintain good record keeping, as signed agreements, emails, and notes from other interactions can help resolve disputes.
  • Ensure you have good legal counsel from an attorney familiar with your industry and with qualifications in small business litigation.
  • Procure insurance coverage against a potential suit, such as general liability insurance.

Q: Why Do Small Businesses Get Sued?

A: There are a variety of reasons small businesses get sued, whether it is from an employee, a customer or prospective client, or a shareholder or business associate. These can include the following:

Q: What Is the Most Common Type of Small Business Lawsuit?

A: Lawsuits from employees are one of the most common types. Employees who feel they have been unfairly disciplined or terminated may choose to sue, seeking retribution for what they view as unfair treatment. Below are typical reasons employees will sue their employer:

  • They do not understand why they were terminated
  • They were terminated for bad performance but received good performance reviews in the past
  • They feel they were terminated under suspicious circumstances
  • They believe the company violated its own policies

Q: What Percentage of Small Businesses Get Sued?

A: Statistics assert that between 36% and 56% of small businesses become involved in some type of litigation each year. Additionally, as many as 90% of small businesses are compelled to go through a lawsuit at some point. According to the U.S. Chamber of Commerce, the following are some of the most prevalent types of small business litigation cases:

  • Employee or customer discrimination
  • Workplace harassment
  • Breach of contract
  • Accidents, injuries, and property damage
  • Payment disputes
  • Wrongful termination

Let The Myers Law Group Assist You With Litigation

The Myers Law Group is based in Newport Beach, California. We understand the impact of litigation on small business owners who have built their companies and firms from the ground up and have to compete with larger corporations. If you are facing litigation and potential court appearances, we can help ease the burden on your business and mental health by working toward a satisfactory outcome. This way, you can return to doing what you love without jeopardizing your future.

Our mission is to provide clients with the greatest possible outcome so that their financial, emotional, and professional world stays secure. If you are interested in learning more about how we can advocate for your rights as a small business owner in California, contact us today for a consultation.