Small Business Law


The Most Frequently Occurring Causes of Small Business Lawsuits

It's difficult enough to run a successful business without worrying about the possibility of being sued. Unfortunately, lawsuits are a reality that many small business owners have to face.

While some lawsuits are relatively straightforward and can be resolved with a simple cash settlement, others are more complicated. Even if you win, you will still be responsible for hefty attorney fees and costs and all of your time and energy in defending yourself. Indeed, even the most advantageous settlements may take your company months or years off the production line while you're busy dealing with the legalities.

To help you avoid some of the most common causes of small business lawsuits, we've compiled a list of the top categories below.

Employment-related lawsuits

While you may not want to consider your team as a potential source of litigation, the employee-employer relationship is one of the most frequent causes of lawsuits. Even if you think about your employee's families, someone will probably believe you unjustly treated them in their working career. Over half of all cases against businesses are employment-related.

The most common type of employment lawsuit is a wrongful termination claim, which occurs when an employee believes they were fired without cause. Other famous examples include discrimination, sexual harassment, and breach of contract cases.

It would be best to understand how to defend yourself from these cases. It's essential to have clear policies and procedures regarding termination, discrimination, and sexual harassment. You should also ensure that all employee contracts are regularly written and updated.

Consumer protection lawsuits

As a business owner, you are responsible for providing your customers with goods or services that live up to their expectations. If you fail to do so, you may find yourself on the wrong end of a consumer protection lawsuit.

Small and medium-sized enterprises are frequently targeted in these lawsuits, but they're prevalent among small businesses. Small businesses often lack the resources to properly train their employees or thoroughly inspect their products before they're sold.

It's critical to maintain your products at a high level of excellence to prevent consumers from making claims. Alternatively, you might train your staff and have systems to respond to consumer complaints. You should also have a procedure in place for addressing consumer concerns.

Breach of contract lawsuits

If you're in the business of selling goods or services, you'll likely enter into contracts with your customers. These contracts outline the terms of the sale, including the price, delivery date, and other essential details.

If you fail to meet the contract terms, you may be sued for breach of contract. This type of lawsuit can be costly, even if you win, so it's essential to make sure that you can meet the terms of every contract you sign.

It's essential to review every contract before you sign it carefully. Make sure you understand all of the terms and are confident you can meet them. You should also have a lawyer look over any particularly complex contracts.

It's far better to pay a little more upfront for a solid contract than spend a lot of money on court costs later on. We can help you avoid breach of contract allegations by carefully drafting or reviewing all contracts you sign, ensuring they are legally sound, and offering you the best possible terms.

Debt collection lawsuits

Like most small business owners, you probably rely on a steady revenue stream from customers who pay their invoices on time. But what happens when those customers don't pay?

If you find yourself in this situation, you may need a debt collector to help you get your money. However, if the debt collector uses aggressive tactics, you may be sued for violating the Fair Debt Collection Practices Act (FDCPA).

Hiring a reputable debt collector who uses legal and ethical methods to collect debts is essential to avoid this type of lawsuit. You should also clearly understand the FDCPA and ensure your debt collector complies with its provisions.

Estate Planning Lawsuits

One of the most common reasons for small business lawsuits is estate planning. When a business owner dies without a proper estate plan, their family may file a lawsuit to get a share of the business. It's essential to have a solid estate plan in place. It's necessary to have a will, trust, and other legal papers that accurately describe how your company will be managed after your death.

If you have a business partner, it's also essential to have a buy-sell agreement. It will outline what will happen to your share of the business if you die or become incapacitated.

It's critical to have a solid estate plan to avoid estate planning lawsuits. It should include a will, trusts, and other legal documents that describe how your company will be managed after you're gone. We can assist you in creating an estate plan that will safeguard your business and family from litigation.

Buy sell agreement

Businessman puts signature on contract at business meeting and passing money after negotiations with business partners.

Third-party injuries

If someone is harmed on your property or using your product, You may be held liable for any losses. A third-party injury claim is the result of this sort of lawsuit.

Avoiding a third-party injury claim is straightforward if you have insurance covering these instances. You should also take steps to prevent accidents from happening in the first place. It might include putting up warning flags, maintaining a safe environment, and providing safety training for workers.

The most significant protection against personal injury claims is to have sufficient liability insurance in place. We can help you choose the best types and amounts of liability insurance for your company. General liability coverage will cover bodily harm claims. Still, in some cases, it may be beneficial to purchase an umbrella policy to protect you from any expenses that exceed your general liability coverage limits.

Intellectual property infringement

If you use someone else's copyrighted material without permission, you may be sued for copyright infringement. It includes using someone else's trademarked logo or selling counterfeit goods.

If you want to avoid the situation, you must get permission before using someone else's intellectual property. It's a good idea to be cautious of anything with logos or pictures that are too similar to those previously registered.

We can assist you in defending your case if you've been accused of copyright infringement. We may also aid you in avoiding copyright infringement by performing a trademark search and suggesting a unique logo or image for your company.

Keep your business out of court.

Small businesses face potentially more damaging effects of litigation than more significant enterprises, which frequently have in-house legal teams defending them. You'll get your dedicated legal counsel when you work with us.

We'll sit down with you to discuss the various legal protections you need. We have you covered, whether investing in the appropriate insurance coverage, reading and amending your contracts, or assisting you in navigating employment law challenges.

We provide a comprehensive range of legal services for company owners. We can assist you in making the best decisions regarding managing your company during your lifetime and after your death. We also provide a LIFT Your Life And Business Planning Session, which analyzes all legal, insurance, financial, and tax systems needed for your business. Now is the time to take action and get your business protected. Give us a call today to schedule a consultation.

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Palm Desert Law Group, APC

74-710 Highway 111, Suite 102

Palm Desert, CA 92260


Tel: 760.674.7175

Fax: 760.610.6641

Email: info@palmdesertlaw.com

Legal Disclaimer: The legal information presented at this site should not be construed to be formal legal advice, nor the formation of a lawyer or attorney client relationship. Any results set forth herein are based upon the facts of that particular case and do not represent a promise or guarantee. Please contact a Family Business Lawyer for a consultation on your particular legal matter. This web site is not intended to solicit clients for matters outside of California.


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