When Should an Entrepreneur or Business Owner Sue?

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As an entrepreneur or small business owner, the last thing you want to do is get caught up in an expensive and stressful legal battle. However, there are times when you have no other choice.

How Civil Lawsuits Work

If you have a disagreement over a small amount of money, these cases are typically taken to small claims court. Each state has different dollar-amount thresholds for what’s considered “small” – so be sure to do your research.

But if the matter is too big for small claims court, you have the right to file a civil lawsuit.

A civil lawsuit is very different than a criminal trial. Unlike salacious murder trials that get plastered all over cable news networks, civil lawsuits are much quieter. While there are situations where civil lawsuits are tried in front of a jury, most are presided over by a judge. (And the majority are settled outside of court.)

The process for filing a civil lawsuit typically looks something like this:

  • Determine who you’re suing. (If there are multiple parties involved, you’ll have to follow this process for each one.)
  • Identify the correct jurisdiction. (This can depend on numerous factors, including the location of the defendant or plaintiff, where the event took place, the type of case, etc.)
  • Draft a demand letter that explains your case and the desired outcome (usually a dollar amount). This letter will be passed along to both the court and the defendant.
  • Fill out all court forms and officially register the claim with the court.
  • Set a date on the court’s calendar.
  • Order papers to be served to the defendant. This will include an official summons for the defendant to appear in court on the date set.

Every jurisdiction does things a little bit differently, but this is the basic process that you’ll find in most cities and states. It should give you a big picture overview of what happens on the front end.

When Should You Sue?

Nobody wants to go through the process of filing a lawsuit and suing another person/entity. But sometimes you have little choice but to uphold justice and/or obtain what is rightfully yours.

If you’re worried about what filing a lawsuit will do to your company’s image in the court of public opinions, you can breathe easy. According to data from a Console & Associates P.C. survey, 52 percent of people believe lawsuits are fine if used appropriately (while another 5 percent of people say lawsuits are good because they promote a fair and just society). So as long as you have justification for filing the lawsuit, this is a non-factor.

But that takes us back to the central issue: When should you sue? What circumstances make it an acceptable and logical course of action?

Well, it depends on how you answer the following three questions:

  • Do you have a good case? You’ll need some concrete evidence in order for your case to see a courtroom. You might know the truth, but subjective evidence will only get you so far. Furthermore, you need to determine if the actions of the defendant are even considered illegal by law. (There’s often a difference between unethical/unkind actions and illegal actions.)
  • Have you exhausted all other options? A lawsuit is what you should pursue after exhausting all other options. Make sure you’ve tried to settle the dispute in other ways before proceeding to court.
  • Will you be able to collect if you win? It’s important to analyze the financial condition of the party you’re suing. It’s one thing to feel confident you’ll win your case, but you have to be certain the other individual actually has the funds. Believe it or not, the court will not directly assist you in collecting your money. You’ll have to oversee this process on your own.

Common Reasons Businesses File Lawsuits

No two lawsuits are ever the same, but here are some common reasons why businesses pursue litigation:

  • Breach of contract
  • Fraud
  • IP infringement
  • Tortious interference
  • Shareholder and partner disputes

Protect Your Best Interests

You don’t wake up one morning and say to yourself, “I would love to sue somebody today!” It’s not a fun experience for anyone. But in cases where you’ve been wronged and your company’s finances or reputation hang in the balance, legal remedies like civil lawsuits are completely justified.

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Anna is the founder and CEO of Johansson Consulting where she works with businesses to create marketing and PR campaigns.