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3 common mistakes that lead to business litigation

On Behalf of | Jul 17, 2023 | Business Litigation |

Starting a business is a complex process that can take many months and requires countless hours of personal time invested in addition to the financial contributions typically necessary to start a functional enterprise.

Entrepreneurs eager to get their concept out to the public as soon as possible sometimes make mistakes by rushing through crucial stages in the business development process that could protect them from litigation down the road. The three mistakes below can potentially increase a startup’s chances of facing a reputation-damaging lawsuit in the future.

Not having custom contracts

Contracts establish the obligations that a business has to its employees and also determine what customers can expect from the company. Although there are boilerplate contracts that people can download from the internet, simply adding a few names and dates to a basic contract will not result in the best protection possible. Custom contracts specifically address unique considerations for the business type and the nature of the contractual agreement. From restrictive covenants to penalty clauses, there are many contract inclusions that could help a business reduce the likelihood of a lawsuit in the future.

Not having appropriate website privacy policies

Online privacy is a hot topic in recent years, especially because consumers are increasingly aware of  the use of their personal private information as a money-making opportunity for businesses they patronize. Businesses should be very clear about what information they gather and about when or if consumers can opt out. Even though the average person may simply click through such agreements without reading them, having the right terms in place can save a business from a lawsuit in the future.

Foregoing a lawyer or hiring the wrong one

Many entrepreneurs think that they can start a business without legal support. While it is technically possible to do so, they can make all kinds of mistakes because they don’t know the law and are unfamiliar with the regulatory requirements for the industry in which they wish to operate.

An attorney can help someone fulfill all the requirements to lawfully operate a business in a specific industry and can also assist with the creation of custom documents, including contracts and website privacy policies, that can protect a business from litigation in the future. Understanding common mistakes made by new startups may help an aspiring entrepreneur minimize his or her risk of litigation.