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2 key tips for avoiding business litigation

On Behalf of | Oct 25, 2023 | Uncategorized |

As a business owner, you likely hope to avoid any type of litigation that can affect your company. Disputes can be costly, they can impact your company’s reputation and they can result in a host of other negative consequences.

Overall, you would just like to stay as far away from any legal disputes as you can. If you’re wondering what you can do in advance to make litigation less likely, keeping the following tips in mind can be very helpful.

Use a partnership agreement

First of all, if you’re working with someone else, you should use a partnership agreement. This can go a long way toward avoiding any litigation or disputes from within the ranks of company leadership. These agreements can help to define many terms, such as what roles you’ll each have within the company or what ownership percentages you’ll control, which can have a big impact on your decision-making power within the business. The agreement can also set up steps to resolve disputes, potentially avoiding litigation in the future because a specific framework is already in place.

Avoid handshake deals

In some cases, your business may involve partnering with another company or working with other businesses in a similar space. An example of this could be if you are a contractor who builds residential homes, and you have to hire subcontractors to do things like plumbing and electrical work. It’s often tempting for people to use handshake deals in these scenarios, but that opens the door to a lot of potential problems. There could be miscommunication about what is actually expected or what payment should look like.

Moreover, not only is a handshake deal fragile when compared to a contract, but an unrecorded agreement is virtually impossible to prove. If there is a dispute but there is a written contract, it may simply be a matter of re-examining the paperwork. But if there’s a dispute over what was said during a handshake deal, it can be difficult to uncover the truth.

Your legal options

As noted, these tips can help you avoid litigation under specific circumstances, but nothing guarantees that a need to initiate or respond to a claim won’t happen at some point. If you do find yourself involved in such a case, be sure you understand the legal options at your disposal by seeking legal guidance as proactively as you can.