Litigation Risk Assessment as a Business Organization Tool

Few business owners would dispute the importance of effective business planning and sound business practices to running a successful and profitable business. As many of Konowitz & Greenberg’s business clients can attest, these principles are the mantra of this firm’s corporate law department.

However, many small businesses do not effectively use the planning tools available to them, particularly when considering and planning for litigation, which can be a valuable business organization tool. As part of our representation of small businesses in both corporate and litigation matters, Konowitz & Greenberg attorneys work with clients to routinely evaluate their businesses, helping them identify and plan for possible litigation before it occurs. The benefits of such planning are not limited to being better prepared for litigation, but include better business practices in general. The reality is that most small businesses will, at one point or another, be involved in litigation, whether as a plaintiff suing to collect on an unpaid debt, as a defendant in a suit filed by a disgruntled employee, competitor or customer or in some other type of business dispute. Companies that plan for these contingencies by adopting sound business practices can improve their chances of prevailing in litigation while minimizing the costs of that litigation and, simultaneously, strengthening their business.

Such planning, and the resulting benefits can take many forms. For example, builders and contractors of every size should adopt clear, consistent, and easily understandable accounting practices and should take particular care to document all work performed and approvals granted. Without such methods in place, companies may find it difficult, expensive, and often impossible to prove what work it has done and what it is owed if a customer refuses to pay. In contrast, if the work has been clearly and consistently documented, it becomes much easier, and much less costly, to prevail on a claim for monies owed.

Likewise, a company adding a website to sell its product should evaluate its exposure to additional liability (i.e., potential lawsuits if client data are stolen from the website) and consider taking steps to reduce its exposure, such as obtaining appropriate insurance coverage.

There are, of course, as many other examples to cite as there are business. We are always happy to discuss litigation potential and risks with our clients, and we encourage you to give us a call.

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