Being sued might be disastrous for your company. So, how likely are you to get sued? What can you do to safeguard yourself?
What you’ll discover:
What Are My Odds of Being Sued?
How Much Would a Business Litigation Cost?
How Can I Safeguard Myself?
Establishing and maintaining your own company may be very gratifying, but it can also dangerous. Maybe you’re trying something completely new and risking your money, time, and aspirations to make it a success. But, things do not always go as planned. Being sued, for example, has the potential to ruin all you’ve worked so hard to achieve. So, how likely are you to get sued? What can you do to safeguard your company?
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What Are My Odds of Being Sued?
The danger of a lawsuit is extremely real: over 100 million lawsuits are filed in state courts in the United States each year. The first step in determining your risks of getting sued is determining where you may possibly be accountable or otherwise legally and financially responsible. Contract disputes are a frequent source of liability for firms, accounting for around 60% of the over 20 million civil claims filed each year. Tort suits are another source of concern. This kind of litigation includes slip and fall claims, job discrimination claims, and even wrongful death claims, accounting for around 11% of all civil lawsuits.
Of course, not everyone is at the same risk threshold. Your odds of becoming engaged in a lawsuit might be substantially influenced by your exposure. For example, if you own a company with a storefront, you might be sued by someone who slips and falls on a wet front step. In comparison, if your company just runs online, you will not have the same level of exposure. Another risk element is having staff, as well as signing a significant number of contracts, particularly if they are complicated. Even your own success may expose you to lawsuits: rivals may submit claims to stymie your advancement, or unhappy staff may bring false claims. Yet, whether justified or not, lawsuits aren’t inexpensive.
How Much Would a Business Litigation Cost?
The cost of a lawsuit is greatly dependent on the cause of action, whether you progress to trial, and whether you win or lose once there. Hiring a lawyer, court filing costs, and discovery may all add up quickly, and that doesn’t even take into account the trial itself. If the case is exceptionally intricate or there are hundreds of essential papers to locate, the procedure will take longer and cost more. If you go to trial, your fees might skyrocket since trial is often the most time-consuming stage of the process. According to courtstatistics.org, the typical cost of a business litigation ranges from $54,000 for a liability claim to $91,000 for a contract dispute.
Lastly, if you lose the lawsuit and are compelled to pay damages, you may suffer hefty expenditures. Contract disputes are often restricted by the contract’s value—you won’t be sued for millions of dollars over a thousand-dollar sales arrangement. Punitive damages may be substantially higher, although they are normally not awardable in breach of contract proceedings unless there are mitigating circumstances linking it to a related tort action, such as fraud. According to a 2009 Bureau of Justice Statistics research, the typical judgment issued in contract lawsuits is $35,000 compensatory and $68,000 punitive.
How Can I Safeguard Myself?
While there is always some danger associated with becoming a company owner, this should not deter you. Here are some easy precautions you may take to protect yourself and lessen some of the possible harm.
Incorporate
For starters, incorporating a firm (or forming an LLC) limits your responsibility to your business alone, keeping your personal assets out of the equation. This works by forming a distinct legal entity for your company; as a result, your company’s legal obligations, including penalties and judgements, are not transferred to you. In general, this implies you won’t lose any personal property if your company can’t pay the payment.
Think about ADR.
If both parties agree, alternative dispute resolution (ADR) such as mediation or arbitration may be a practical means to address conflicts while avoiding the expenses of litigation. You may also include clauses in your contracts that require differences to be resolved by binding arbitration, thus removing the need for a trial. Other strategies include having business insurance and just avoiding trial by reaching a good settlement.
Maintain Accurate Records
Finally, maintain detailed records. Not everyone takes the time to put day-to-day dealings in writing in the fast-paced world of handshakes and verbal contracts; nonetheless, there’s nothing like having well-documented facts on your side to establish your position or to avoid confrontation entirely. Apart from litigation, putting everything in paper may assist you in preparing financial statements and taxes, as well as just being more organized. If it’s significant, you should consider getting it in writing, whether it’s bills, contracts, or any other agreement.
