Small businesses are the backbone of the economy, accounting for nearly half of all private-sector employment in the United States. However, with the rewards of entrepreneurship come risks, including lawsuits. With such a significant impact on the economy, it is essential to examine the frequency of lawsuits against small businesses.
According to a report by the U.S. Chamber of Commerce, small businesses are sued approximately once every three years. While this may seem infrequent, the cost of litigation can be staggering, with the average cost of a small business lawsuit exceeding $100,000. Understanding the frequency of lawsuits can help small business owners prepare for potential legal challenges and take steps to mitigate their risk.
What Are the Most Common Types of Lawsuits Against Small Businesses?
While small businesses can face a variety of legal challenges, some types of lawsuits are more common than others. Here are a few of the most frequent types of lawsuits that small businesses face:
- Breach of contract
- Discrimination and harassment claims
- Intellectual property disputes
- Personal injury claims
- Employment law violations
Small business owners can take steps to reduce their risk of facing these and other types of lawsuits. For example, implementing clear policies and procedures, providing regular training to employees, and seeking legal advice can all help to minimize the risk of legal challenges.
How Can Small Businesses Protect Themselves From Lawsuits?
In addition to taking steps to reduce their risk of legal challenges, small business owners can also take proactive measures to protect themselves from the financial impact of lawsuits. Here are a few strategies that small business owners can consider:
- Obtaining liability insurance
- Using alternative dispute resolution methods, such as mediation or arbitration
- Creating a strong partnership agreement or operating agreement
- Maintaining accurate and complete records
- Working with an experienced attorney to develop a comprehensive risk management plan
By taking these and other steps, small business owners can better protect themselves from the financial impact of lawsuits and focus on growing their companies.
Lawsuits can have a significant impact on small businesses, both financially and operationally. While the frequency of lawsuits against small businesses may be relatively low, the cost of litigation can be staggering. Small business owners can take steps to reduce their risk of legal challenges and protect themselves from the financial impact of lawsuits. By working with experienced legal professionals and taking a proactive approach to risk management, small businesses can thrive and contribute to the overall health of the economy.