ENTREPRENEURSHIP / SEP. 10, 2014
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Steps Entrepreneurs Should Take to Avoid Litigation

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One of the main ingredients to a successful entrepreneur is someone who is willing to take risks in order to see great rewards. However, there are specific areas where an entrepreneur should not take risks, but rather needs to take steps to avoid litigation. David Bates is a shareholder at Gunster, which is a large law firm in Florida. In a recent BizJournals.com article, Mr. Bates shared his expertise from more than 20 years representing entrepreneurs in regard to how they can avoid litigation. This article will discuss those steps that Mr. Bates shared.

Advice From a Legal Consultant to Entrepreneurs

Mr. Bates also co-chairs Gunster’s Technology & Emerging Companies practice group. His key areas of expertise for counseling entrepreneurs are the following: mergers and acquisitions, technology law, venture capital transactions, corporate finance and securities. In his BizJournals.com article, Mr. Bates shared that “after representing entrepreneurs for more than 20 years, I remain dismayed that many business owners believe litigation will result in a satisfactory resolution to their disputes.” He most often advises his clients that it is more beneficial to them if they can avoid litigation because there are many costs associated with it.

  • Possibility exists that they could lose the litigation and need to pay damages
  • There is the potential negative publicity to consider as well as damage to reputation
  • The litigation process is onerous and lengthy and can cause you to lose focus on work

 

Mr. Bates does explain that there are several ways that entrepreneurs can avoid such costly litigation proceedings. The following list describes his advice.

1. Cultivating Relationships is Important

Establishing and maintaining professional relationships with customers, employees, colleagues and business suppliers is important. Mr. Bates advised that when people are treated “fairly, they are less willing to ruin an existing good relationship by litigating.”

2. Do Your Research First

You should always know who you are actually doing business with and who is in your professional circle. According to Mr. Bates, entrepreneurs can simply avoid litigation by doing business with legitimate individuals. Stay away from people and companies with negative reputations, a history of litigious activity or other red flags.

3. Review, Document & Read Everything

Entrepreneurs, who understand the importance of putting everything in writing, will avoid possible litigation. Mr. Bates shared that many times disagreements happen because of miscommunication. However, if all business dealings are properly described in writing, ambiguities can be avoided. It is also important that you read all of the fine print before signing written agreements. Be certain that you understand and also agree with everything in the contract. In Mr. Bates’ experience, it is necessary to “regularly review purchase orders and standard agreements to ensure they reflect the most recent law and your current business practices.” There is another factor regarding documentation that Mr. Bates advised entrepreneurs to follow. Maintaining comprehensive files regarding your business relationships is vital. Relying on memory and verbal communication only is not the ideal situation.

4. Be Genuine in All You do

Never make promises that you cannot keep, whether it concerns your assurances in word or in your marketing and promotional materials. Mr. Bates asserts that providing inaccurate information and over-promises is a deceptive business practice and can lead to litigation.

5. Have an Action Plan for Potential Problems

According to Mr. Bates, you should have an action plan in place to deal with potential problems. Knowing how to respond before the actual issue arises will help you to avoid litigation. It is vital to address problems as soon as they arise. Not dealing with them in a timely manner can cause these issues to progress to litigation. Mr. Bates provided the following action plan to deal with problems.

  • Create a chain of command that will ensure that the proper procedures regarding disputes are implemented.
  • Speak with all parties involved in the dispute and document all information so that it can be satisfactorily reviewed.
  • Take the time to review the entire situation regarding the dispute, including, all written communications such as emails, texts and instant messages.
  • Seek out the impartial advice from trusted individuals to help you to objectively evaluate the situation and seek a viable solution.
  • Realize that you must make every effort to try to comprehend the point of view of your adversary and see the strengths and weaknesses of their position.
  • Locate a reliable and trusted attorney that you can retain to provide you with viable and sound legal advice regarding your rights, the potential liabilities and the strengths and weaknesses of your arguments.
  • Understand that you may be wrong in your position and need to take responsibility and then work diligently to fix the problem by mitigating damages to the parties involved.
  • Think twice before countersuing, even if you were 100% right because you may not truly feel like a “winner” afterward.
  • Gauge the probability of whether or not you will actually recover damages and receive the resolution you wanted.
  • Create an action plan for possible solutions regarding obtaining a suitable resolution without having to resort to litigation. You want to seek a resolution which is a win-win compromise for all parties involved.
  • Maintain a professional attitude throughout the entire communication process with your adversary. An open and productive dialogue can resolve many issues more quickly.

It is important for entrepreneurs to realize that there are significant steps they need to take in order to avoid possible litigation proceedings. Litigation can drag on for many years and cause an entrepreneur to get a bad reputation and waste valuable, time, energy and resources. This article addressed some sage advice from legal consultant, David Bates, regarding steps to take in avoiding litigation.

 

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