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Should Your Small Business File a Lawsuit?

Posted by Jonathan Krems | Mar 24, 2022 | 0 Comments

In today's Freedom Friday blog and email newsletter, I want to talk about an issue that comes up at some point in the life cycle of any small business.  At some point, one of your customers is not going to pay their bill and is going to owe your business money.  Or you are going to pay another business for a product or service, and that other business won't deliver even though you paid.  Either way, you may consider filing a lawsuit to resolve either of these issues.  But should your small business file a lawsuit?

In today's Freedom Friday blog and email newsletter, I want to share six factors to consider in deciding whether or not its time for your small business to file a lawsuit:

  1. Damages

The first factor you should consider in deciding whether your small business should file a lawsuit is damages.  You should think about how much you stand to gain from a lawsuit, especially if you win.  If your small business has only suffered minor damages, or its difficult to prove your damages, you need to think about whether a lawsuit is worth the time and money.  You should also consider the amount of your actual damages.  Unless you need an injunction (because you need someone to do something or stop doing something), your small business needs to have suffered monetary damages, e.g. loss of revenue because a customer hasn't paid their bill, or because you paid for a product or service which you did not receive.

  1. Collecting Damages

The second factor you should consider in deciding whether your small business should file a lawsuit is collecting damages.  It's one thing to get a judgment but collecting on a judgment is another issue altogether.  If the defendant doesn't have assets or has few assets, you may be unable to collect the monies you're owed.  An experienced business attorney can assist you with this aspect of your case and find out if the defendant might be “judgment proof.”  Also, a defendant can always file for bankruptcy, and that will stop your case in its tracks.

  1. Locating the Potential Defendant

The third factor you should consider in deciding whether your small business should file a lawsuit is locating the potential defendant, which is the person or business you want to sue.  You should consider how easy or difficult it is to locate the potential defendant, especially if they do not have a permanent address or you don't know where they're located.  It is important to choose an experienced business attorney who partners with a skilled process server who can effectively and efficiently get your potential defendant served without a lot of added expense.

  1. Where to File Your Lawsuit

The fourth factor you should consider in deciding whether your small business should file a lawsuit is where to file your lawsuit.  Its important to discuss with an experienced business attorney where the lawsuit needs to be filed.  Should you file the lawsuit in the county where your small business is located, or the county where the defendant is located?  If a defendant owes your small business money, and they live in a county far away, you may need to sue them in the county in which they reside, which may be more expensive than suing them in the county in which you reside.  An experienced business attorney will help you understand your options in this part of your decision.

  1. Cost of the Lawsuit

The fifth factor you should consider in deciding whether your small business should file a lawsuit is the cost of the lawsuit.  You should consider not just the filing fee and costs of service, and of course what you're being charged by your attorney, but also how far the lawsuit might go until you get a judgment.  If you have to conduct discovery, prepare a motion for summary judgment, conduct depositions, mediations, or trial, all of that process will increase your costs of the lawsuit over time.  You also should consider if you will have to pay the defendant's attorney fees if you lose.

  1. Preventing Ongoing Damage

The sixth factor you should consider in deciding whether your small business should file a lawsuit is whether your lawsuit would prevent ongoing damage to your small business.  Even if you're unable to collect monetary damages, a lawsuit may be worth it if it allows you to stop ongoing damage to your small business or prevent future losses down the road.  In some situations, you as the small business owner must take legal action to protect your small business from further damage due to all sorts of issues which might arise.  This is especially true if there is an ongoing fraud, an ongoing partnership dispute, or similar types of issues where an injunction or more severe remedy might be needed to resolve your dispute.  Further, a judgment might show the offending party that there are consequences for their actions and persuade them to stop damaging your small business, failing to deliver their promises on a contract, violating a non-compete, or otherwise harming your small business.

If you're small business is having collection issues, contract issues, or experiencing other barriers to growth, please contact me at [email protected] to schedule a FREE strategy session.

For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/

About the Author

Jonathan Krems

Jonathan is the Founder and Managing Attorney of Liberty Legal Solutions, LLC, a law firm dedicated to building, protecting, and defending the business and personal interests of our clients in Oklahoma.  Jonathan's primary practice areas are business law, contracts and agreements, business liti...

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