As a business owner, you spend an enormous amount of time trying to avoid this situation. However, it is not uncommon during the course of business that you will be faced with the prospect of having to defend your company against a lawsuit. This can happen to sole proprietorships and large corporations alike. To help you prepare for any possible business disputes that turn into litigation, we have outlined five types of business disputes that commonly lead businesses to the courtroom.
1. Employment disputes.
Things were probably simpler when you were simply a sole proprietorship but, thankfully, your company expanded and you needed some more labor to keep things running. However, hiring employees comes with a whole new set of potential liabilities. As an employer, you have to be aware of wage and overtime laws, anti-discrimination statutes, OSHA guidelines, and so many more legal protections for employees.
2. Disputes with partners or other owners.
You probably went into business with your partner while feelings were positive and you were both excited about the prospect of bringing your business idea to life. Once the rubber meets the road and you have to confront profit allocations, agreements regarding the direction of your company, and creditor payments, things can turn sour – especially if there is an insufficient partnership agreement in place. If mediation or arbitration fails between you and your business partners, litigation could be in your near future.
3. Breach of contract disputes.
Effective and fair contracts are the lifeblood of any company. Your small business has contracts with suppliers, clients, independent contractors, master franchisors (if you are a franchisee), and other third parties. If any party to a contract fails to live up to its end of the bargain by missing a deadline, not paying or rendering service, or otherwise not fulfilling an obligation, the dispute could eventually escalate to the courtroom.
4. Disputes over commercial leases.
On the subject of contracts, one such contract many business owners are party to is a rental lease. There are many ways that commercial tenants and landlords may become embroiled in a dispute, but some of the common reasons are conflicts over duty to repair, early termination, and subleasing.
5. Shareholder disputes.
Conflicts can arise between different classes of shareholders, normally minority shareholders claiming oppression by majority shareholders. Other times, shareholders might file a lawsuit claiming that the Board of Directors is not fulfilling its fiduciary duty. Whatever the reason, litigation brought by shareholders is always a possibility for public companies.
There are steps business owners can take to try to avoid litigation, but it is sometimes unavoidable. Whether you are setting up your company and want to find out how you can minimize the possibility of litigation or need counsel for a current lawsuit, reach out to Trembly Law Firm to discuss your options with a competent and experienced business law firm.