Anyone who plans to open a business or is currently running one must know the potential for business litigation. Regardless of who you contact or pay to advise you, you can only partially eliminate the possibility of litigation. Even in a hypothetical sense, the perfect business could become the defendant in a frivolous lawsuit. Business law attorneys would realize this during the discovery phase and work to prevent the case from going to court, but the possibility exists. With that in mind, shift your perspective into doing what you can to avoid litigation from destroying your business.
Prevention Is Critical
They are key documents to focus on, especially if you are just starting a business. One of the common mistakes that new business owners make is assuming that registering their company is enough protection. Choosing a business entity, such as an LLC, C Corp, etc., is progress, but more is needed. Anyone who overlooks the importance of documents such as operating agreements and vendor contracts will likely be laden with litigation.
Think of an operating agreement as a prenuptial for your business. Put it this way: If three best friends start a business without an operating agreement, they are flying down the express lane toward litigation. All it takes is one mishap or assumption to create a situation that must be resolved through the court.
Operating agreements set up who gets paid when, who is in charge of tax-related issues, and other vital details. The more buttoned up your operating agreement is, the less infighting you will have.
You can set yourself up to avoid significant issues with the correct documentation and up-to-date compliance handbooks. Are issues going to surface? Absolutely, but when they do, you need to be able to find the document that resolves it—or at least outlines the framework for pursuing a resolution. The risk of not having the proper documentation in place is too severe. One dispute could cost you upwards of $50,000 – $100,000.
That is why it is imperative that your external documents are as detailed and well-written as your internal ones. Develop a close working relationship with a business law attorney. Not only will they assist you with creating these documents, but they will also be there to advise you. For example, you will likely be doing business with other businesses in some capacity. What contracts do you have that will protect you and your business? What sort of due diligence is going to be required before you choose to do business with them? If the company is in a different location than yours, then other municipalities will likely have different rules.
Meet with a Business Law Attorney
At Jayaraman Law, we want you to avoid unnecessary legal challenges because of incomplete or poorly-drafted contracts. We will create the documents you need to start your business, which will be pivotal for long-term success. To learn more about how we can help you and your business, contact us today to schedule a free consultation.
Jayaraman Law
