Business litigation is common among small business owners
Business Litigation with Small Businesses
The Small Business Association applies different standards on what qualifies as a “small business” depending on the industry; but realistically, most people think a small business is a few dozen individuals at max. Its common to hear about business litigation amongst owners of small businesses. There is frequently a lack of paperwork to guide the owners. As a business grows and progresses, common goals and initial ideas between the founders ultimately fade from memory. Small businesses tend to forgo putting agreements in writing and don’t keep good financial records. As a result, disputes can easily arise and consequently turn to business litigation.
New startups are susceptible to a lack of paperwork because entrepreneurs want to move quickly from concept to product. A startup begins with a couple of individuals who have an idea. The idea quickly turns into a product, and the business is underway. Percentage of overall business ownership interest and ownership in intellectual property are typically not discussed. Valuing work product versus monetary capitalization can be difficult after-the-fact. Buy-sell agreements, employment agreements, confidentiality agreements, memorandums of understanding, and intellectual property licensing agreements are all important documents at the beginning of a startup. Failing to outline the key details of a small business arrangement will quickly lead to disputes and litigation.
Business litigation is a process of resolving disputes between parties. The litigation process begins with a lawsuit that is brought before a court with proper jurisdiction. Litigation is the entire process from filing the lawsuit to conclusion of the lawsuit -judgment or settlement. For example, business litigation typically includes a claim for breach the contract, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, unfair competition, or tortious interference with business relations. There are a whole slew of other claims that can and are often included in business litigation. Litigation can be emotionally exhausting and financially devastating.
The best way to avoid small business litigation is to:
- Write down agreements
- Communicate regularly, discuss potential issues, and watch the tone of the communication
- Hold regular meetings, keep meeting minutes, and have owners sign off on the meeting minutes.
A great way to reduce potential business litigation costs is to preemptively sign an agreement to mediation or arbitration. The parties can preselect a mediator or agree to binding arbitration with one to three arbitrators. Mediation is intended to resolve any business disputes before they get out of control. Learn more about alternative dispute resolution with the Sacramento County ADR Information Package.
Sacramento Business Attorney
There is no need for business litigation. By taking the initial steps and investing the time on the front-end, small business owners can avoid potential disputes and litigation. Its more cost effective to take precautions rather than wait for the issue to be resolved in court.
Trevor Carson is a Sacramento based business attorney. In 2015, he was named by Sacramento Magazine as a top lawyer in Sacramento and was named a Rising Star by Super Lawyers Magazine. He has helped countless businesses avoid litigation by mediating disputes beforehand and helped dozens of other businesses resolve disputes during litigation. Please contact our Sacramento business attorney if you have any questions or want to learn more about options available to small business owners.
By: Trevor Carson Google+
*The information provided in this post does not constitute legal advice or opinion. The information is for guidance purposes only. Individual situations vary. This blog article may contain language which could be read as a testimonial or endorsement. That testimonial or endorsement does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. This blog article is an Advertisement and or Newsletter. Sacramento’s business attorney Trevor Carson discusses challenges of small business litigation.