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Analyzing how litigation affects small businesses

On Behalf of | Aug 13, 2014 | Business Litigation

When a company is sued by an employee, customer or competitor, the litigation is usually difficult to deal with, regardless of the company’s size. However, lawsuits are often particularly problematic for small businesses. In Fort Lauderdale and throughout Florida, a number of issues lead to the filing of lawsuits, such as breach of fiduciary duty, fraud, breach of contract, deceptive trade practices and more.

A study conducted by the Small Business Administration’s Office of Advocacy highlights some of the legal hardships that small business owners have to endure. Legal costs often range from $3,000 to $150,000 and business owners often found themselves trying to regain this money by expanding services, working harder to attract new business, or even making changes to lower the expenses of operating their business. Some business owners reported that the damages almost shut them down.

After evaluating the data, the study came to the conclusion that litigation changes the way many small firms conduct business, causes emotional distress within the company and drains them of precious time and money. Most small business owners are tremendously invested in their company both emotionally and financially. As a result, many are seriously impacted by litigation and even change the way they operate afterward, such as losing trust in employees and customers or having a tighter grip on the company and their assets.

Those who participated in the study described numerous preventative measures they implemented due to litigation, including:

  • Addressing every complaint that arises, regardless of how insignificant it may seem
  • Ensuring that all workers are bonded and the business is insured
  • Keeping better tabs on all important documents
  • Posting every mandatory EEOC notice and checking to make sure they are not taken down
  • Protecting intellectual property better

Small businesses are a crucial component of the American economy. According to the U.S. Bureau of Labor Statistics, entrepreneurs often decide to launch a small business when they first get started and are trying to grow their customer base and figure out if they should expand. From a firm that has been operating for decades to a recently-launched start-up, it is imperative for all small business owners who are facing litigation to do everything they can to prevent a lawsuit from destroying what they have worked so hard for.