3 Risky Business Moves That Can Lead to LitigationExperienced business owners know to mitigate risk as much as possible, especially risks that can lead to costly litigation. While there are some inherent risks to any business that can be anticipated and planned for, there are some that seemingly come out of nowhere, without a plan in place to diminish them.

These three business risks all have the potential to lead to litigation, which means they should be avoided at all times:

Risk #1: Engaging in verbal or handshake agreements.

It is not uncommon in the startup phase of a business for management to make plans based on a verbal or handshake agreement, usually with someone they’ve done business with before or know personally. This most often happens with startups operating on a shoestring budget without the cash to pay for goods or services. They may make a deal to trade goods for a percentage of future profitability or a piece of the business itself without fully documenting the agreement in writing. This thinking has landed many an entrepreneur in court fighting for their company — and when it’s their word against yours, things can go sideways fast. It doesn’t matter if you are making a deal with family, friends, vendors or customers — always get it in writing!

Risk #2: Unintentional use of another’s intellectual property.

Imagine you have what you think is a world-changing idea that you believe you can monetize quickly with your startup. You perform a little due diligence — usually a quick Internet search — to see if it’s already out there. Nothing comes up, so you go ahead and invest all you have into your idea. Just when your company is gaining some traction, you receive a letter telling you that your business is infringing on an existing copyright, patent or trademark. If you don’t stop marketing your idea, someone is taking you to court. But if you do stop, you lose your investment. Neither scenario is going to work out for your business. To avoid this, be sure you have an experienced business attorney perform an in-depth search to ensure your business idea or even your branding is free and clear of any existing registrations.

Risk #3: Engaging in unfair competition.

One of the most common violations of unfair competition laws is when companies hire a heavy hitter from a competitor who then brings their old company’s customers with him or her to the new company. While it’s not against the law to hire someone from a competitor, you have to be sure that your new hire doesn’t use a previous employer’s confidential information to benefit your company. Be sure your background check on potential new hires includes ascertaining whether they have non-compete, non-disclosure or confidentiality agreements in place and that if they do, you honor those agreements.

Johnson Legal PC has extensive experience in providing legal guidance during the start-up phase of small organizations, as well as during the more mature periods of organizational growth that larger business and corporations face. Contact us to learn more about how a great corporate attorney can help your business thrive.