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How Does Litigation Impact Small Businesses?

How Does Litigation Impact Small Businesses?

When a small business faces litigation, several things can happen, especially when the news media takes the story to the public. Statistics show it takes about three years to establish a company fully. Whether the accusation is true in the case isn’t the primary concern. People will judge the company or brand and avoid it if they hear anything negative concerning the issues. Within a few days to weeks, the entire company could collapse. 

An attorney who knows the business and how to restore its reputation after litigation is the only chance the company will have to continue. Significant corporations can afford the cost, but even they take the frontal hit from the media and the public. Small businesses must play their right cards to continue once the news spreads its information out to the public. 

Different Types of Litigation on Small Businesses

At the forefront, most businesses today are sued due to their customers or workers getting injured. Other litigations arise from faulty products or food sold by small businesses. Discriminatory cases and racial issues are also some of the most prominent issues that small businesses fail the public and their employees. 

The media is the worst enemy in these situations because it paints a picture of the company or brand names in people’s minds. When it comes to the Constitution, every person is considered innocent initially, and guilt is shown over the course of undeniable evidence. 

The media does not say if a company, person, or brand is guilty, but they paint the picture for the public to decide. In doing so, most people will, unfortunately, follow along with the opposing side. This method allows the company’s scenario as being guilty and must prove its innocence in court. There are many more reasons that a company faces litigation, but the impact is the same.

The Impacts on the Company

In the years it takes for a small business to grow and become established, everything can fall apart almost overnight when a company is tarnished by litigation. It can take much longer to regain their establishment up to its original standards. Many small businesses never recover and are forced to close their doors to business. This is the worst-case scenario. 

Court Costs

Going through the motions to prove innocence can be costly. Commercial insurance, such as Workers’ Compensation or other private insurance, can cover most costs. However, it will still dip into business emergency funds and profits to fight specific accusations if a case is overdrawn for long periods. Large companies or corporations can cover the cost, but small businesses are susceptible to losing funds. 

Loss in Profits and Sales

In the time spent in court, the owner can lose profits and sales due to the negative image litigation will place on a company. Sales will drop afterward as the public will refrain from doing business with the company. This effect can last for several years. Some companies will have loyal customers, but it may not be enough to help them. 

A Damaged Reputation

A small business’ reputation is everything. It is through word-of-mouth advertisements that most businesses thrive. Once their reputation is damaged, it is a strong possibility that they may never get back up to par. Word-of-mouth advertisements are useless if a complaint is filed through the Better Business Bureau. 

What Can Business Owners Do?

When dealing with the public, it is almost impossible to determine what could happen. The best a business owner can do is follow all the laws in business and safety. They can create a safe and happy workplace to the best of their ability. Commercial insurance or an LLC is the best way to protect their assets. 

The hard truth is that a disgruntled employee or customer can file a claim anytime. It doesn’t have to be the truth to cause damage. False accusations have the same effect as real ones. Some protection options for business owners are putting in security cameras, warning or notice signs, having witnesses, and carefully reviewing all business-related contracts with their attorney.

Taking the proper steps to protect themselves as business owners and following their attorney’s instructions is the best way to avoid litigation. Getting with an attorney immediately is the best option if one should pop up.

What Can an Attorney Do to Save a Small Business?

The first step is always the consultation process. A business owner can have a business attorney from the moment of establishment. Immediately, the business owner can meet with the attorney, and they will review the situation. Most of the time, conditions are resolved outside of the courtroom. The business attorney will be the voice of reason throughout the duration. 

An attorney will open up an investigation to get to the facts. If the case goes before the judge, they will present evidence, speak on the business owner’s behalf, and represent them to achieve the best outcome possible: clearing the business owner’s name and company or brand name. 

When restoring the good name of the business owner, company, or brand name, the attorney may hold press conferences to assure the public that their client is legit in business. This will stop most of the negative outpour from the media. However, it is not a 100 percent guarantee because the public can and will decide what they want, no matter what is said and by whom. 

Lastly, the attorney can file claims if slander is involved. It protects the client in litigation if an individual spreads false accusations or slander. 

Contact Trapp Law, LLC. for Protecting Your Business’ Reputation

Trapp Law, LLC understands the devastation litigation can cause to the reputation of a business. If your company faces litigation, it is best to have attorneys that know how to assist you, as the business owner, in such cases. Trapp Law, LLC is ready to hear your story and get your business back in good standing. Contact us immediately!