5 Reasons You And Your Business Are Going to Get Sued

lawsuit, employment agreement, fiduciary duty(See our sponsored post policy here.)

Running a business is a risk. No matter what line of work you’re in, or how cautious you are, there is always a chance that you will get a really ticked-off client, or have a dispute with a vendor, or a business partner, and it won’t be possible to work out your differences.

I know, it sucks. But the good news is there are things you can do to reduce your chances of getting sued.

Trust me, you do not want to be sued. Being involved in a lawsuit is draining – and not just on your bank account. It will drain your spirit, your energy and make you forget why you wanted to go into business in the first place.

It will make you want to drag yourself back to whatever under-the-radar dead-end job you can find that will have the least risk possible.

On the other hand, if you do want to be sued because you’re a masochist or don’t like extra money sitting around in your bank account, then follow these steps and you’ll be on a sure path to the courthouse.

1. You Make Promises You Can’t Deliver On

If you want to get sued, make promises where you can’t deliver.

We’re not talking about “New York City’s greatest hamburger” or “World Famous Chicken Wings” – because everyone knows those promises are a load of crap. We’re talking about “this one little pill will cure your migraine headaches” or “this baby crib will not suffocate your baby.”

Think: snake oil. You don’t want to be snake oil.

A better approach is to stay good on your promises and over deliver. Customers remain happy if they think they got good value. This is especially important where your clients are spending vast amounts of money for your services.

Of course, most businesses must walk a fine line. You may use superlatives to try to get people through the door, or buying your products. But any strategy of produce sales that relies upon over promises will not be sustainable.

2. You Do Not Have An Employee Handbook

Another way you can welcome a lawsuit is by not having an employee handbook. This is a simple step you can take today that will cut down on the chances of a lawsuit.

An employee handbook is a simple communication tool which sets the ground rules for your employees, describing what you expect from them and what they can expect from your company.

You have no excuse for not having an employee handbook, especially given how easy it is to create one from a template.

If you have to fire an employee, and you don’t have a handbook, it will be more difficult for you to establish that the reason they were fired was justifiable.  Be sure that your employee handbook defines broadly the various different grounds upon which you may terminate an employee.

Once you adopt an employee handbook, don’t forget to follow it! An employer who has stated policies which were not followed may be held to a higher standard. For example, if you have a handbook that states that employees will not terminated or disciplined under certain circumstances, yet you terminate a certain employee for one of the reasons that are protected in your handbook, then the fired employee may argue that they were wrongfully terminated because your company failed to follow your own procedures.

3. You Signed a Personal Guarantee.

A personal guarantee is a promise by an individual to repay a debt if the main party to an agreement cannot or does not.

In and of itself, signing a personal guarantee won’t get you sued. However, it certainly increases your chances. After all, what’s the point of forming a corporation or forming a LLC to shield you from liability if you later get sued on a personal guarantee?

There are two problems. One is that many people don’t realize the significance when they sign a personal guarantee. People tend to assume the best, so they assume the personal guarantee will never be necessary.

The second problem is that there are many circumstances where you must sign a personal guarantee or else you won’t get what you need. For example, commercial property owners often require the principal of a business to sign a personal guarantee for a lease agreement, or a lender may require a small business owner to sign a personal guarantee on a business line of credit.

It’s a difficult choice – refuse to sign the guarantee, or sign the guarantee and get the lease or loan you need. Most people simply sign the guarantee and hope for the best. A better option is to sign the guarantee, but to cap the amount of your damages in the agreement.

4. You Do Negligent or Intentional Acts Which Harm Others.

This is a no-brainer.

You own a LLC or a corporation. You get drunk during a business lunch and cause a car accident, or you leave broken glass out where customers may step.

Personal injury and accident claims are be easily avoided with just common sense.

Or you get in a fistfight with a customer in your store (not a great way to get repeat business, by the way).

These are negligent and/or intentional acts, and they will subject you to a lawsuit. But I don’t think you really needed me to tell you that.

5. You Breached Your Fiduciary Duty.

If you are an officer or a director of a corporation, you have a fiduciary duty to the company’s shareholders. This is a legal obligation to act in the best interests of the shareholders.

The client is entitled to the best efforts of the fiduciary on his behalf and the fiduciary must exercise all of the skill, care and diligence at his disposal when acting on behalf of the client.

The fiduciary is held to a high standard of honesty and full disclosure and cannot obtain a personal benefit at the expense of the person or shareholder.

Any owner who violates this fiduciary duty can be sued personally for damages that result from their actions or inactions.

Did we miss any major ways you can get sued? Feel free to share them in the comments below!

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Photo credit: Flickr/ Freedom To Marry





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