Key Tips On How To Prevent Business Litigation

Disclaimer: This article should not be treated as legal advice. It’s recommended that readers still consult legal counsel and contact a lawyer should they have any concerns regarding business litigation.

As a business owner, you must understand that the market isn’t always about the money alone. Sure, maintaining a profit is important in maintaining your place in the market, but having good foresight in other aspects of your business is also a good way to make sure you survive in the long run. Outside sales, you have marketing, advertising, and publicity to worry about. In terms of legalities, however, you also need key tips on how to prevent business litigation.

If you have specific inquiries on certain situations, especially if it pertains to your business in itself, it’s still better to consult the help of a legal professional in order to ensure you have all aspects of your company covered in terms of preventing business litigation.

Structure Your Business Carefully


When it comes to preventing business litigation, it’s important to start with the basics: how is your business structured in the first place? Remember that certain business structures have their advantages and disadvantages. In fact, while you may have you own reasons to choose the kind of setup you have now, it’s important to know the risks involved with each business type. For instance:

    • If you’re a sole proprietor, remember that creditors can reach your personal assets should a litigation happen.
    • If you’re an informal partnership, partners may get in trouble for the things other partners do, even if the former is unaware of the other’s actions.
  • If you’re an LLC or something called a Subchapter S corporation, you may receive advantages as this allows you to separate your personal assets and business assets. However, this is only effective depending on the kind of business you operate.
  • In short, it’s important to know the kind of structuring you need your business to do in order to make sure your personal assets are protected in the event of a litigation. You might want to structure your business into different entities so your assets can be protected, such as real estate or intellectual property.

Nurture Your Relationships, Study Disputes

If you want to ensure a prosperous relationships with clients and avoid business litigation, it might be advisable to ensure all steps in the relationship are covered properly. For instance, try to make sure your contracts with other businesses are reviewed by your respective legal counsels. This might be costly, but it’s a more worthy investment than to spend it on litigation.

  • In fact, it might be helpful if you carefully consider who you conduct business with as well. Not all partners can help your business. Be sure to review your relationships with clients and partners as their movements can affect your company’s status.
  • Moving forward, it’s best you have a lawyer review all your contracts, especially those that you are directly involved in. Make sure you ask about the things that are unclear to you. If you’re still negotiating a contract, make sure you clarify the things that aren’t very clear as well.
  • This applies to your employee contracts as well. Key employees such as managers might benefit from non disclosure agreements, or non-competition agreements. Be sure to consult with your lawyer if you think such an option is applicable.
  • On your end, it might be helpful if you become more proactive and try to manage disputes before they even get to worsen or escalate. Constantly communicate with your peers, your customers, and your stockholders in order to get to know their concerns, especially if there’s a dispute to solve.
  • In the same token, it might be helpful to analyze the previous disputes your company has had before in order to be more aware of the circumstance that led to such an encounter. This can help you formulate a way that could help the company avoid these circumstances moving forward.

Keep Your Growth Consistent

According to Small Business Today, perhaps one of the best ways to avoid business litigation is to make sure your business is constantly learning and evolving with the times. This doesn’t mean your business should evolve with the market, but it should constantly evolve and be aware of factors that could affect it, both internally and externally. In short, make sure you have all your exits covered, and you might be much safer against business litigation.

  • For instance, try to ensure that the kind of insurance you have is suited for the risks your business will take. For instance, general liability insurance or commercial property insurance can be supplemented with professional liability and product liability insurances. The kind of insurance you should get must be directly useful to your business. If you’re a software company, perhaps data breach insurance might be helpful as well.
  • Also, make sure you keep records of everything that is happening to your company. Digital records are safe as they save space and are always accessible, but always make sure they are well-protected. Disputes can be avoided if you can produce the kind of documents needed in order to supplement a discussion, such as contracts and relevant correspondence.
  • Sometimes, it’s also helpful to manage and train your staff in order to make sure best practices are observed even by your personnel. Be prepared to setup proper guidelines such as those involving their social media etiquette, and other important things to note of in order to ensure your employees can protect the company and themselves from the litigation.


Business litigation can be a very complicated thing to deal with, and it can bring a lot of stress to parties involved in the matter. Should you decide to push through to court, you may spend a lot of time and resources for expenses outside your business, and it can harm your business in a variety of ways if you’re not careful. As such, the key tips on how to prevent business litigation above can be important points to consider, especially if you want your business to operate safely and smoothly across the market.

Irene Wall

Irene Wall has been writing about law for more than a decade. She writes pieces on various law topics that she hopes could help the common reader with their concerns. She enjoys playing basketball with her sons during her free time

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