Common Causes of Business Litigation and How to Protect Your Company
Running a business is a rewarding venture, but it comes with its share of risks. One of the most significant challenges a company can face is litigation. As a business owner, you pour everything into your company's success. The last thing you want is a lawsuit that drains your resources, time, and focus. That's why seeking legal guidance before a problem arises is so important.
At North Carolina Estate Planning & Fiduciary Law, we have seen firsthand how legal disputes can disrupt operations and threaten a business's foundation. With extensive experience in business law, our team helps North Carolina companies prepare for and manage legal challenges. We believe in providing proactive legal support to help our clients establish robust legal protection for their businesses and provide a shield against litigation. Located in Charlotte, North Carolina, our firm serves clients across the state.
What is Business Litigation?
Business litigation refers to the legal process of resolving disputes between companies or between a company and other parties, such as employees, customers, or government agencies. These disputes can encompass a wide range of issues and are typically resolved through negotiation, mediation, arbitration, or a court trial.
The goal of litigation is to reach a resolution, which might involve a monetary award for damages, an injunction ordering a party to stop a specific activity, or a court order requiring a party to fulfill a contractual obligation. Since the process can be lengthy and costly, many business owners prefer to settle disputes outside of court whenever possible. Having a solid legal strategy from the beginning can make all the difference.
Common Causes of Business Litigation
While every business is unique, certain types of disputes tend to occur more frequently than others. Therefore, being aware of the common causes of business litigation is the first step toward protecting your company.
Breach of Contract
Contracts are the backbone of business relationships. They specify the terms of agreements with suppliers, customers, employees, and partners. A breach of contract occurs when one party fails to fulfill their obligations as defined in the agreement. This could involve failing to deliver goods or services, not paying on time, or violating a non-compete clause. These disputes are among the most common reasons for business litigation.
To protect your company, your contracts must be clear, comprehensive, and legally sound. Ambiguous language or poorly defined terms can easily lead to misunderstandings and disagreements. We always recommend having an attorney review or draft your contracts to help you identify potential risks and create enforceable agreements.
Employment Disputes
The relationship between an employer and its employees can sometimes give rise to legal conflicts. Some of the common employment disputes include claims of wrongful termination, discrimination, harassment, wage and hour violations, and retaliation. Even with the best intentions, a company can find itself facing a lawsuit from a current or former employee.
Protecting your business involves establishing clear workplace policies and procedures. This includes creating a detailed employee handbook that details everything from conduct expectations to the process for filing a grievance. Consistent and fair application of these policies across your entire organization is just as important.
Shareholder and Partnership Disputes
When you go into business with others, you are bound by shared goals and legal agreements. However, disagreements can arise over the direction of the company, financial decisions, or the roles and responsibilities of each partner or shareholder. If these internal conflicts are not resolved, they can escalate into litigation that threatens to dissolve the business.
A well-drafted partnership or shareholder agreement is your best tool for preventing these disputes. This document should clearly define the rights and responsibilities of each owner, outline the process for making significant decisions, and establish a procedure for resolving disagreements or for one partner to exit the business.
Intellectual Property Infringement
Your company's intellectual property (IP), such as trademarks, copyrights, patents, and trade secrets, is one of its most valuable assets. When another party uses your IP without permission, it can harm your brand and your bottom line. Similarly, there may be instances where your business could be accused of infringing on someone else's IP.
Protecting your intellectual property starts with formally registering your trademarks and copyrights. It also involves implementing policies to safeguard your trade secrets. Taking these protective measures makes it easier to defend your rights if an intellectual property infringement occurs.
Business Litigation Laws in North Carolina
In North Carolina, business disputes are governed by a specific set of statutes and legal precedents. For example, breach of contract claims are generally subject to a three-year statute of limitations, meaning you have three years from the date of the breach to file a lawsuit. The state also relies on the North Carolina Trade Secrets Protection Act, which provides legal remedies for the theft or misuse of confidential business information.
Understanding state laws is crucial for any business operating in this state. North Carolina's court system features a specialized Business Court that is designed to handle complex business litigation cases efficiently. Having legal counsel familiar with the procedures and judges of the North Carolina Business Court can be a significant advantage if your company encounters a business-related dispute. Our attorneys stay current on state laws and local court rules to provide our clients with informed guidance.
Proactive Steps to Protect Your Business
When running a business, the best way to handle a lawsuit is to avoid it altogether. Therefore, it's important to take proactive steps when forming your business and related documentation to protect your business interests. Some proactive steps you can take to reduce your risk of litigation include the following.
Put it in writing: Always use written contracts for your business agreements. Verbal agreements are difficult to prove and can often lead to misunderstandings.
Establish clear policies: Develop a comprehensive employee handbook and internal policies that outline expectations and procedures. Make sure they are distributed to all employees and applied consistently.
Maintain accurate records: Keep detailed records of all business transactions, communications, and decisions. This documentation can be invaluable in the event of a dispute.
Seek legal counsel early: Don't wait for a problem to become a crisis. Consult an experienced business litigation attorney when drafting contracts, making major decisions, or facing a potential dispute.
Business Litigation Attorneys in Charlotte, North Carolina
At North Carolina Estate Planning & Fiduciary Law, we help North Carolina businesses thrive. Our Charlotte-based team supports business owners, buyers, and investors during pivotal moments—from resolving disputes to planning for future growth. Our goal is to help your business capitalize on opportunities, such as acquisitions, mergers, or sales, and establish provisions and strategies for managing potential litigation. We are dedicated to your success, and we provide the legal guidance needed to protect your business and achieve your goals.
With offices in Charlotte and Matthews, North Carolina, we help clients throughout the surrounding areas. Contact us today to schedule a consultation for your business litigation needs.