Litigation can be an expensive and lengthy process for small business owners, and it is important to consider both the possibility as well as the consequences of litigation before you find yourself in this situation.

According to the Small Business Association Office of Advocacy, the cost of small business litigation can range from $3,000 to $150,000. Additionally, 43% of small businesses have either been involved or been threatened with litigation.

Small business owners impacted by litigation may see a decline in business, have challenges in morale among employees, and have catastrophic financial damage as a result of a lawsuit. The best way to avoid small business litigation is through prevention. Contact the experienced business attorneys at the Law Offices of Jonathan Fleisher, Esq. at 732.360.6409 to learn more about your legal rights as a small business owner, and ensure that you have taken the steps necessary to prevent a lawsuit.

Why Small Business Litigation Occurs

Small business litigation can occur for numerous reasons. Small business owners should take the time to become aware of the types of litigation that may occur, and then attempt to prevent and avoid these situations. While this list is not exhaustive, some of the reasons that small business lawsuits happen include:

  • Employment law – Small businesses may be sued for wrongful termination of an employee, failure to comply with employment laws, discrimination, and harassment.
  • Franchise law – Franchise lawsuits are types of litigation that occur when a franchiser sues a franchisee because they have violated the terms of their agreement.
  • Intellectual property (IP) law – Small business litigation can also stem from a small business claiming United States Patent and Trademark Office IP infringement, or when they are accused of violating copyright law.
  • Property dispute law – Property litigation is an area where small businesses may be involved in proceedings for the ownership or use of a property.
  • Products liability law – Small businesses that manufacture goods should become aware of potential product liability lawsuits if their goods cause a consumer any kind of harm.
  • Contract law – Small business owners should always do their best to ensure that they are meeting the terms of any contractual agreements. Failure to do so can lead to litigation with employees, consumers, or other business partners.
  • Electronically stored information (ESI) – ESI is a new area of law that small businesses should be aware of. The vast amount of personal and business data stored on computers in the current digital age means that small businesses are heavily affected by this type of litigation, which covers both civil and criminal proceedings.”
  • Tax Fraud – Small business owners may have erred on their tax deductions and find themselves accused by the Internal Revenue Service of fraud. Alternatively, small businesses might contract for work with a small business contractor who failed to appropriately file their taxes.
  • Fraudulent Misrepresentation – Fraudulent misrepresentation is a type of small business litigation that takes place when small businesses fail to disclose all the information about their product or service.

Reducing the Threat of Small Business Litigation

Prevention is the best approach when it comes to small business litigation. Although there will always be risks associated with becoming a business owner, there are some ways that you can protect yourself and ensure that your legal and financial rights remain protected.


Taking the step to formally incorporate a small company ensures that the company’s assets will be protected by creating a separate legal entity for your business. Making the decision what type of business to create (Limited Liability Company, Partnership, S-Corporation, C-Corporation, etc.) is an incredibly important choice. Consider visiting with an experienced business attorney at the Law Offices of Jonathan Fleisher, Esq. in order to ensure that your legal rights remain protected.

Create a Solid Legal Foundation

From franchise contracts to trademark registration, small business owners should take the time to consider all legal aspects of their business. It is important to have a solid legal foundation in place so that if small business owners are ever involved in litigation, they will be prepared. Make sure to consider all aspects of your business including employee handbooks, employment contracts, landlord-tenant contracts, tax requirements, zoning and coding regulations, product liability disclosures, and third-party legal agreements.

Keep Your Small Business Organized

Keeping your small business records organized and up to date can ensure that you have the facts and evidence on your side in the event of small business litigation. Make sure to have every aspect of your business memorialized in writing for vendors, business partners, and employees. Invoices, contracts, agreements, taxes, and financial statements should be organized in such a way that they can provide the evidence necessary in the event your small business is on the receiving end of an unexpected lawsuit.

Consider Alternative Dispute Resolution

Alternate dispute resolution (ADR) includes options such as arbitration or mediation. Mediation or arbitration is preferred when the small business wants an amicable negotiation between parties with no pressure of legal battles in courtrooms and with little chance that one party will walk away empty-handed. Incorporating ADR into your contracts from the beginning can almost completely eliminate the potential that your small business will go to trial.

What To Do If You Face Small Business Litigation

If someone threatens to sue your business, or you are faced with a lawsuit, consider taking the following steps:

  • Stay calm. Do not immediately respond in any way that might negatively impact your case.
  • Collect evidence and information. Make sure to find all records, evidence, contracts, and information related to the issue in order to better understand the strength of your legal position.
  • Consider contacting an experienced business attorney. If your small business is facing a lawsuit, consider contacting an experienced business attorney in New Jersey in order to better understand all of your legal rights.

Contact an Experienced Business Law Attorney at the Law Offices of Jonathan Fleisher, Esq.Today

Most small businesses are busy following their entrepreneurial dream, and the last thing on their mind is the possibility of a lawsuit. Visiting with an experienced business law attorney from the Law Offices of Jonathan Fleisher, Esq. can help you prepare a solid foundation upon which you can attempt to prevent numerous types of small business litigation before it occurs. Contact our legal team at 732.360.6409 today to schedule a meeting, and ensure your hard work and small business remains protected.