Litigation is expensive and time-consuming. It is costly in terms of legal bills, litigation costs, and lost productivity. Furthermore, if there is an adverse result, then there are the costs of paying the judgment. Litigation can kill a startup and seriously undermine an existing business. We here at San Diego Corporate Law think it is best to avoid litigation when possible. Here are a few tips for avoiding litigation.

San Diego Corporate Law: The Six Common Sources of Litigation

In general, there are six common sources of litigation:

  • Payment disputes such as with your suppliers, vendors, creditors — you did not get paid or they did not get paid
  • Performance disputes — they did not perform or you did not perform or performance was less than expected, etc.
  • Accident-related litigation — insurance is an absolute necessity
  • Employee-related disputes — these might be payment disputes, but also termination, harassment, discrimination, etc.
  • Owner-related disputes — control battles, buyouts, force-outs, etc.
  • Government-related disputes — taxes, permits, licensure, regulatory compliance, etc.

Knowing the common sources of litigation is the first step towards avoiding litigation.

San Diego Corporate Law: Prevent Litigation by Hiring A Good Lawyer

The next two best methods of avoiding litigation are honoring your contractual and legal obligations and hiring a skilled and experienced corporate lawyer from the start, long before disputes get close to the litigation stage.

With respect to payment and performance disputes, for example, to avoid BEING sued, do your best to make payments on time and otherwise perform in a full and timely manner.

To avoid HAVING TO SUE, a good corporate and contract attorney can draft your vendor and sales contracts with sufficient “teeth” to strongly incentivize your vendors and customers to pay on time and otherwise perform. As we have written, using provisions with respect to On-Time-Payment and Monthly Interest clauses are contractual mechanisms for encouraging performance and avoiding litigation. Attorneys’ Fee clauses and Limiting Right to Sue clauses serve similar functions.

Obviously, the best way to avoid business disputes in general is to make sure all of your contracts are in writing.

With respect to ownership and control issues, often the MOST important method of avoiding litigation is to hire an attorney from the start to write a custom-drafted ownership agreement including provisions covering buy-sell eventualities. The process of drafting an ownership agreement often uncovers areas of unknown disagreement. Resolving those from the start, when everyone is pleasantly disposed toward one another is essential. Early resolution is also good business planning since certain types of events are foreseeable. As such, let’s plan for them now. Some of those foreseeable events might be an unexpected death, disability, divorce, etc.

Hiring an excellent corporate attorney can also help with the other common sources of litigation. For example, a well-constructed and complete employee handbook can help avoid employment-related litigation. Likewise, a good corporate lawyer can help you remain in compliance with various governmental and administrative obligations.

Contact San Diego Corporate Law Today

If you want more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides a full panoply of legal services for businesses including helping your business avoid litigation. Mr. Leonard can be reached at (858) 483-9200 or via email.

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