Hello, Small Business Owner, did my headline make your heart skip a beat? Good. That means you aren’t about to live in denial and pretend that your livelihood isn’t at risk every day you run a business without the proper structures in place. The truth is, your livelihood is at risk. Every minute of the day, you risk being sued as a business owner, and you are probably not adequately protected. You probably never took the time to learn about why lawsuits happen, what they look like, how to prevent them, and how to protect yourself if they do happen. I’m going to take you through 5 reasons why you’re screwed if you’re sued. But don’t worry. I can get you to a much more solid place.
1. You’ve Got a Million Reasons to Be Sued.
Your business is just a lawsuit waiting to happen. The possibilities for lawsuits are endless. The top reasons businesses are sued are: Employee lawsuits, intellectual property infringement, breach of contract, and torts such as negligence, personal injury, and product liability. But you can really be sued in many different capacities. You can be sued by visitors that never buy anything. You can be sued by customers or clients. You can be sued by employees. You can be sued by vendors. You can be sued by competitors. The visitors, customers, and employees might have attorneys who work on a contingency fee, so they have all the resources they need to bring a lawsuit to fruition. The vendors and competitors might have more resources than you do to pay for attorneys. And when you’re sued, maybe your insurance will pay for your lawyer, or maybe not. Maybe you’ll be stuck paying $300+ per hour to defend yourself.
2. Your Business Isn’t Adequately Legally Protected.
If I had to guess, I’d say that 1 in 100 businesses has the proper legal structures in place to protect the business owner’s personal assets if they are sued. Most people who own small businesses just filed LLC paperwork with the State and paid their $100 and now they think they’re protected. Wrong! Here’s how a lawsuit works: A. A Plaintiff sues you. Let’s say they slipped and fell in your store. So they sue you, Business LLC, and they sue you, Ms. Business Owner, personally. B. You hire a defense lawyer. The defense lawyer answers the complaint asking to dismiss the suit against you personally, because you have an LLC. C. Well, the Plaintiff will reply to that by saying that you have a sham LLC. They will subpoena all of your business formation and annual upkeep docs, taxes, bank information, and anything they find that shows your LLC is a sham will be up for grabs. Don’t have an Operating Agreement? Don’t keep annual minutes? Charge personal items to your business card? Those are a few of many ways Plaintiff’s attorneys will tear apart your LLC defense. Oh, and you’ll be paying your lawyer $300 an hour to even try to defend you.
3. You Definitely Don’t Have Enough Insurance.
Your insurance is not going to cover you in most of the situations you could be sued in. You probably didn’t have a good grasp of the issues you faced as a business owner, heard some options for coverage from your insurance person, and went with one that seemed like it would cover a lot but not cost a lot per month. But let’s go with the slip and fall we just talked about. So now that the judge has ruled that you are personally liable because your LLC is a sham, your only hope is that your insurance coverage will be enough to pay whatever damages you will owe to the Plaintiff. But you probably don’t have enough. And if you don’t have enough – let’s say you have $5 million in coverage, but damages are $10 million – then the Plaintiff can come after most of your assets and garnish your wages.
4. A Lawsuit Takes a LOT Longer Than You Think.
In addition to all that you could lose, this lawsuit will drag on FOREVER. Did you think it would take about a year? Wrong. The average lawsuit takes somewhere between 2-5 years. That’s a lot of your life and it takes up a lot of your mental capacity. I worked on a business partnership dispute for 5 years that started 5 years before I came on board, and lasted 5 more years after I left the firm. That’s pretty extreme, but you can definitely expect 2-5 years of your life to be dominated by a lawsuit if you’re ever sued. That means constant hearings, depositions, sleepless nights, stress and worry about how it will end. Trust me – you will not love being sued. And each month, you’ll get a bill in the mail for thousands of dollars.
5. You’ll Lose Everything You Love about Your Business.
When you get sued in your business, your business changes. It becomes a source of anxiety, fear, and pain, instead of the source of passion, freedom, flexibility, and a promising future that you intended it to be. It doesn’t just take a lot of time and money – it takes a ton of mental anguish as well. It dominates your life while it goes on, and depending on the result, perhaps for years afterward.
Don’t worry. I can help. There is a lot that we can do to help you to protect yourself and your business, so that you can have solid foundation. Then you can focus on the things you enjoy about your business.
I’m starting an affordable business membership program for business owners who want a solid foundation for their business that protects them if there are hard times. If you want to be the first to know when I unveil the program, sign up for my email list. I’ll only have 12 spots when I open it, and you’ll want to get the introductory price. Sign up for the email list here.
To help you get your plan in place as quickly as possible, call or email today at (503) 235-5150 or [email protected].
To your family's health & prosperity,
P.S. Want to get started on the most important planning you'll ever do for your family and business? Give our office a call at (503) 235-5150 to get started. You'll be glad you did.
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