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What to Know About Business Laws, Lawyers, and Lawsuits

Did you know that over 75% of small business owners are concerned about being targeted for a lawsuit? With 43% of small businesses being threatened with a lawsuit yearly and the average liability suit costing at least $54,000, this fear may not be unfounded. 

However, you can minimize this risk and not have to spend time worrying about litigation by being proactive and informed.

In this quick guide, we’ll cover the basics of business laws, when to pursue legal assistance from a business attorney or law firm, and what happens if you’re hit with a lawsuit.

*Disclaimer: All content in this guide is intended to be general information, and nothing constitutes legal advice. Please consult an attorney before making any intellectual property or other legal decisions.

What is small business law?

Small business law refers to the collection of legal rules, regulations, and practices that govern small businesses’ formation, operation, and dissolution.

How important are business laws for new entrepreneurs?

A basic understanding of state and federal business laws ensures that you operate within legal boundaries and prevent costly fines or legal disputes. 

Knowing relevant business laws helps you make informed decisions, avoid common legal pitfalls, and build trust and credibility with customers, stakeholders, and the broader community. 

Your goal should be to have a foundational knowledge of business laws. You don’t need to be a legal expert. Instead, recognize when to consult legal professionals for detailed advice or clarification. 

Regularly attending workshops, joining business associations, and staying updated with industry news can also help you stay informed.

Small business lawyers and attorneys

Small business lawyers are pivotal in guiding businesses through the sea of laws and regulations. 

They can offer advice, draft contracts, and ensure that your business remains on the right side of the law.

Do you need a business lawyer?

Small businesses do not always need to retain a lawyer, but legal advice can be vital during complex situations like drafting contracts or handling disputes. 

Taking a proactive approach by consulting with a lawyer regularly can prevent potential issues and ensure compliance. 

While hiring an attorney might seem like an added expense, the benefits often outweigh the costs. Think of it as an investment. You can save significantly by spending now, avoiding fines, lawsuits, and other legal complications.

Small business lawsuits

No business, regardless of its size, is immune to lawsuits. From employee disputes to customer complaints—lawsuits arise from various situations. Being prepared and informed is your best defense.

What happens if your small business gets sued?

If your business faces a lawsuit:

  • Remain calm
  • Gather necessary documents
  • Seek legal advice to strategize 

Lawsuits can bring financial and reputational challenges, so it’s vital to comprehend the consequences and aim for a resolution that safeguards your business. 

After resolving the lawsuit, reflect on the experience to enhance business operations, communication, and contracts to ensure you’re better prepared.

Knowing the basics of small business laws is essential for every entrepreneur. You can avoid any nasty legal surprises by being informed, proactive, and seeking the proper legal counsel.

Part of being proactive is checking off all the legal requirements necessary to start a business. While you can complete most of these in any order, here are a few suggestions.


2023 Small Business Statistics

Small business laws FAQ

Business law involves areas like employment law, contract law, tax law, intellectual property law, and corporate law, among others.

Businesses should adhere to federal, state, and local regulations related to licensing, employment, taxation, environmental standards, and consumer protection.

While often used interchangeably, a “lawyer” is someone trained in law, while an “attorney” refers explicitly to someone legally qualified and authorized to represent clients in court.

Small businesses can get sued for various reasons, including breach of contract, employment disputes, intellectual property infringements, and non-compliance with regulations.

Businesses in sectors with high customer interaction or complex regulations, like healthcare, construction, and retail, often face a higher risk of lawsuits.

To minimize the risk of lawsuits, ensure compliance with all regulations, maintain clear contracts, offer proper training to employees, and seek legal advice when in doubt.