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Five ways to avoid costly business litigation

Few things threaten the reputation and financial stability of a small business more than litigation. Becoming embroiled in a courtroom dispute can swiftly sap resources and derail production. However, litigation is not inevitable. Savvy business owners can take certain steps to minimize the potential for internal and external conflict.

According to Smart Business magazine, these are a few of the most important steps that business owners can take to avoid litigation:

1. Keep your eyes on the primary goal: making a profit.

As a business owner, you may take personal offense to another party's actions or to want to passionately defend an ideal. Nevertheless, it is critical that you remain focused on what will ultimately profit your business. Is litigation likely to drain your capital instead of increasing it? If so, it only makes sense to overlook the offense or find alternative dispute resolution options that are more cost-effective.

2. Draft buy-sell provisions ahead of time.

Minority shareholders tend to cause more than their fair share of headaches for business owners. With this in mind, you should ensure that your shareholder agreements include buy-sell provisions. Such provisions can often make it possible to remove a contentious shareholder before litigation ever arises.

3. Create clear employment policies.

Disgruntled employees are a constant threat to businesses in every industry. To avoid spurious claims regarding discrimination, unpaid benefits, sexual harassment, time off and other matters, you need to have clear policies in place. You should know these policies inside and out, and your employees should also be thoroughly trained on them.

4. Draft customer contracts carefully.

A single clause in a customer contract can sometimes tip the balance in your favor. The way terms and conditions are worded, the choice of venue outlined, and the inclusion of other key elements can often prevent litigation or give you the victory at court.

5. Safeguard your intellectual property.

Don't neglect important steps such as registering your business name with the U.S. Patent and Trademark Office. You will also want to ensure that your other intellectual assets are protected through the appropriate patents, copyrights and trademarks.

Finally, if corporate conflict is looming on the horizon despite your best efforts at avoiding it, don't hesitate to consult a business litigation attorney. A lawyer who has particular experience in this area of law can advise you of your rights and your full range of dispute resolution options.

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Robert Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the May issue of The American Lawyer & Corporate Counsel magazine.Alex Kaufman has been selected as a 2013 Top Rated Lawyer in ‘Commercial Litigation’ as will be published in the December issue of The American Lawyer & Corporate Counsel magazine.

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