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Did I start my business to end up in a lawsuit?

Lawsuits Are the Quickest Way to Drain Cash Flow

Most small business owners open up a business with high hopes of being successful and NOT to end up in a lawsuit!  Break promises. Ignore complaints from employees and customers. Don’t pay overtime. Be unaware of local and state business laws. Don’t follow terms in the employee handbook. Ignore legal obligations. No small business owner willingly adds these items to their checklist when starting their business. But many of you will do so inadvertently by trying to take on certain tasks alone which can have devastating consequences for your business. If you are trying to draft legal contracts and navigate employee issues that are paramount to the success of your business without an experienced attorney, you are asking for legal trouble.

Why Do Small Business Owners Opt For Do-It-Yourself Contracts?

The obvious answer is cash flow. As a small business owner, your cash flow is probably erratic – up and down like a rollercoaster. Because of that, you have to prioritize what to spend your money on and a lot of things go to the bottom of that list. But having an experienced small business attorney should never be one of them.  “Rather than wait until a small problem turns into an expensive legal battle, growing companies should work with lawyers early and often to protect themselves from future problems. Attorneys who help small businesses get set up are generally much cheaper than litigators who represent companies in messy court battles.”

As a business owner, you wouldn’t dream of not buying liability insurance for the building where your business is located. If that building goes up in flames, you need to be protected so you can rebuild it. And the same logic applies to contracts your business needs and to handling employee matters. It takes just one person to file a lawsuit for your business to go up in flames. Downloading and not having proper contracts puts your business at risk for lawsuits.

What Could Possibly Go Wrong If I DIY?

Small business owners mistakenly believe that any form of a contract will provide sufficient protection if legal trouble arises. But that is a false sense of security that could be financially devastating. Contract language makes or breaks the validity of your contract. Terms may not be spelled out that are specific to your business. Terms can be nullified if they conflict with local and state regulations. Even worse, a downloaded or improperly thrown together contract may not provide any legal protection which becomes a liability for your small business.

We live in an expensive litigious society and you do not want to be the next headline. Lawsuits take a disproportionate toll on small businesses which cost them over $105 billion per year. Small business owners do not have the resources to spend on lengthy, costly, or frivolous lawsuits. One lawsuit could mean the end of your small business.

What Types Of Claims Will Land Me In Court As A Small Business Owner?

Wages are a common pitfall for business owners. They tend to classify employees as independent contractors for tax reasons when that is incorrect or they fail to pay overtime correctly. For example, a small drywall company in Spanish Fork Utah was hit with a $650,000 fine for damages to employees for wage violations. Small business owners simply do not have that kind of cash lying around and ignorance of the law will not erase your legal liability.

Examples Of Other Lawsuits You May Encounter Include:

  1. Breach of contract. This means you failed to carry out the terms of your contract.
  2. Torts. This happens when someone comes into your store and slips and falls. If injuries are incurred it will be very expensive very quickly.
  3. Discrimination in the form of age, race, sex, or religion.
  4. Harassment which includes sexual harassment, hostile work environment, and physical attacks. The #MeToo movement has accelerated the number of claims being brought against employers. In fact, in 2018 the EEOC secured $505 million for victims of harassment. As a small business owner, you simply cannot afford to not protect your business against these types of claims.
  5. Recently passed COVID-19 legislation. If you have not distributed written policies about emergency paid leave and you have failed to pay for such leave under the Families First Coronavirus Response Act (Act), then you are putting your business at risk. It only takes ONE employee to call the Department of Labor about your mistakes with #EmergencyPaidLeave.

How Can I Prevent This From Happening To My Small Business?

As a small business owner, you know how many different hats you wear. You cannot possibly be aware of all the legal obligations you are under. Which makes finding good resources even more important so you can always be informed of your legal responsibilities. An experienced attorney like Dana Ball or a trusted accountant will become a valuable resource. If a claim is filed against you, you don’t get to say, “I was unaware of the law so I shouldn’t be responsible.” Ignorance of the law is not a valid excuse and you will be responsible for damages. Statistics say landing in court is not a matter of IF but WHEN so being proactive about protecting your business is the best investment you can make.

But I Can’t Afford An Attorney?

Yes, an attorney is expensive but it’s not an obstacle that can’t be overcome. Many attorneys charge specific fees instead of billing by the hour, that will fit the particular needs of your business. Maybe you just need an operating agreement or an LLC set up. Maybe you only need a handful of different contracts drafted or an employee handbook written. Or you could be in a tricky situation with an employee and need legal advice on what to do.  Perhaps you haven’t updated your leave policies with the recent legislation passed regarding COVID-19 and need help to quickly get that done. Every single business needs to have written policies in place that will protect them from litigation.

Protecting Your Business Early Is Cheaper

As a small business owner, you did not go into business to lose it so make sure you consult with someone who will protect your business. As Ball says, “Is it really worth the risk of minimizing costs by downloading forms and risk losing your business down the road because you didn’t understand something and weren’t properly protected? Do it right from the start and you’ll protect your business and not end up a horror story.”

Practical Legal Insights #15 Avoid Court


We have several videos where you can learn how to better protect your business on our YouTube channel and Facebook page. It’s FREE learning for the business owner 24/7!     


Don’t DIY When It Comes to Protecting Your Business!

Every business owner wants to honor contracts and legal obligations, quickly resolve complaints regarding harassment, discrimination, and wages and be aware of all the laws regarding your business. There are many things you can do yourself for your business, but contracts and employer obligations should not be one of them. Even day-to-day decisions may need legal advice.  Pay attention to the daily things you could do differently as a business owner that will avoid a lawsuit.  What’s the price of doing things right from the beginning versus the cost of doing it wrong? The best way to ensure the success of your small business is to have an experienced small business attorney like Dana Ball in your corner to help you avoid preventable lawsuits so you can focus on growing your business successfully. 

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