Top 3 Reasons Why Small Businesses Get Sued

As a business owner, you’re a risk taker. You took a chance in your industry to pursue something you believe in and are passionate about.

From putting products out into the public marketplace and using market research to create and promote other materials to entering into client contracts and inviting the general public to view and interact with what you’ve made, owning and operating a business comes with a slew of risks.

Aside from dealing with the public and business interactions that come with a sale or a client, you also have a commitment to your employees. You’ve hired a team that has expectations of you, of the workplace, and of the business outcomes. Sometimes, those viewpoints may not match your own, and that in itself is a risk.

As a business owner, you also face the risk of potential lawsuits. This might be the last thing on your mind, as you constantly have your hands full of business deals, operational concerns, and more.

It turns out that as many as 53% of small businesses are involved in at least one lawsuit at any given time. Small business lawsuits affect nearly every industry, impacting bottom lines, business reputations, and the health and well-being of business owners and their employees.

Small Business Lawsuits 

In order to avoid business litigation as a small business owner, understanding some of the most common small business lawsuits is the first step.

#1. Employment Issues 

If you have a disgruntled employee, past or present, that feels like they’ve been done wrong or that policies were not followed with employees as laid out in the business standards, you may face employment law actions.

Employee lawsuits most often involve the feeling that someone was improperly treated or wrongfully terminated but can stem from several other situations:

• The employee was terminated for poor performance despite positive performance reviews
• The employee was fired at a suspicious time, i.e., following a manager or coworker complaint 
• The employee doesn’t believe their concerns have been taken seriously 
• The employee received poor treatment following an EEOC (Equal Employment Opportunity Commission) charge 
• The employee felt that the company didn’t follow protocol for termination or dealing with other “handbook” situations 

As wrongful termination lawsuit examples, avoiding these situations require familiarization with federal and local employment laws as well as compliance with those laws.

Other common reasons for employment-related lawsuits in a small business include harassment, discrimination, and breach of contract. These can be avoided with sound and consistent HR policies and regulations laid out plainly for your entire staff.

#2. Fraud

Small business litigation is also often rooted in fraud claims. Some of these claims may involve a business intentionally misleading customers or clients with deceptive business practices, products, services, or other commitments.

Even if you think you are running a clean, honest business, you still run the risk of fraud claims against you. Employees or others that you do business with and that represent you and your company are liabilities.

As business representatives, anything they do while on your contract or payroll falls back on you. Any fraudulent activity on their end inevitably becomes your responsibility.

Lay out the law (handbook style) for your employees, clients, and more by teaming up with a business lawyer and your HR department (if applicable). Educate your employees about fraudulent behaviors, detect suspicious activity, and avoid unknown/unclear business territory when possible.

#3. Contract Disputes 

Consider the contracts that may exist within a business. From vendors and suppliers to employees and clients, there is a never-ending stream of binding contracts and agreements that must be maintained in order for business operations to run smoothly and for all parties to hold their own.

Performance, or lack thereof, when it comes to upholding the negotiations within a contract is also a very common form of business litigation. Avoiding contract disputes means designing your business contracts in a complete, fair, and reasonable manner.

Have a business lawyer review all contracts before signing them to avoid a possible breach of contract down the road. This way, all parties will understand the fine details of the contract and know how and when to play their part.

This will also give you the opportunity to have someone else scan the contract to catch any possible legal traps that can lead to other business lawsuits.

Trusted Business Lawyer in Los Angeles

When it comes to running your business, there are plenty of things to consider, and it can be difficult to keep track of all the legalities required to operate efficiently. Enlisting the services of an experienced business lawyer can ensure that any legal issues that arise in your business are sufficiently addressed and resolved.

With Rokita Law, you can breathe a little easier knowing you have a business lawyer on your side that offers solutions to many legal needs with experience, passion, and integrity. Located in Los Angeles, California, we practice in many areas, like civil litigation, business law, real estate law, and intellectual property, to give you well-rounded support with trusted, professional lawyers.

Schedule a consultation today to find out how we can help and watch your business thrive.