judge, court, gavel

How To Prepare Your Business For Litigation

Litigation can occur at the drop of a hat. If your business is ill-prepared and lacking the support and advice of experienced counsel, you will find yourself at a disadvantage before a lawsuit is even filed.

Here are some things you can do to prepare:

Consult & Hire an Experienced Lawyer

Business owners often fail to address legal issues proactively. They do not foresee litigation and as such, they wait until a suit is actually filed to get their processes in order. This is dangerous, because it can lead to fear-based, expensive decisions and put your business at even more risk.  

To avoid this, the first step in preparing your business is to engage legal counsel. While you could wait to bring in an attorney at the first site or threat of trouble, a more secure tactic is to work with an attorney at the onset of your business. Hiring a good business attorney can simultaneously help your business avoid litigation and prepare for it at the same time. You will be able to consult and strategize with someone who already knows your business as well as its strengths and weaknesses. Additionally, having someone you can quickly call will allow you to get a jumpstart on defending your business and avoid potentially costly delays.

Understand Your Liability Exposure

Regardless of pending litigation, every business owner should be diligent in understanding the potential liability exposure that may accompany litigation.  The “corporate veil” may protect your personal assets depending on your chosen business structure. However, if you own your business as a sole proprietor or if you commit intentional wrongdoing in your incorporated business, there may be situations where your personal assets can be at risk.

Know Your Insurance Coverage

It is crucial that all business owners are aware of insurance coverage options and requirements that can help protect you and your business when a lawsuit occurs. There are several insurance lines that your business can benefit from such as Employment Practices Liability, Worker’s Compensation, Directors and Officers, and Commercial General Liability policies. Having a good insurance policy in place is an invaluable asset when financially protecting your business. In addition to understanding your policies, you should make sure that your business has enough cash on hand to cover any deductible costs or other upfront costs that may not be reimbursed by insurance until weeks or months later.

Organize Your Files

While business owners should always be careful to track and organize important files such as contracts, employment agreements, and purchase agreements, you should be especially sure to keep complete records about the person or entity filing suit as soon as you find out they are initiating the dispute.  You may be asked to furnish this information in litigation proceedings.

Other Things to Keep in Mind

  • Do not hide information from your lawyer. Be completely upfront and honest about the facts. It will make it easier for your lawyer to strategize the best approach to litigation and hiding information could be highly detrimental to your case.
  • Stay engaged throughout the process. While your attorney will take the lead and manage the litigation process, they will likely need to be in consistent communication with you to discuss additional questions, document requests and litigation plans.
  • Protect yourself from future suits. Following a suit (and sometimes during, if advised by counsel), you may need to make adjustments or change to the way your business operates to avoid a similar situation from reoccurring. For example, if you get sued by a former employee for termination without cause, you may want to work with your attorney or HR department to put a sound termination process in place.

When faced with litigation, hiring the right lawyer and proactively implementing the steps above at the first sight of a dispute can make all the difference in the world for your business.

What Should You Do Next?

If you are interested in learning more about how Capital Partners Law can represent your business, there are plenty of ways to get in touch: