Youve got a great business, now prepare to get sued

As the list of sureties go, add ‘getting sued’ alongside death and taxes.  Unfortunately you can and will be sued for anything at any time.  It’s not a matter of if, it’s a matter of when.  Below are the times I’ve seen companies most vulnerable to a suit:

 

-You just raised a big round.  Next time you raise a big round, think twice about calling Crunchbase and announcing it to the world.  Making the raise public lets everyone know that you have money and inevitably, the haters will hear about it.

 

-You’re about to sell the business.  This is arguably the point at which you’re most vulnerable because even if you have insurance, it doesn’t matter.  A potential acquirer is going to say “make this go away, tomorrow,” and many acquirers will pass all together, even if it’s an asset sale.  Filing a claim with your insurer is going to take many months (sometimes 10+) so you’re almost always going to be forced to settle.  If you’re selling the business, tell as few people as possible and do everything you can to make sure past employees or former business associates do not find out. 

 

-You just fired someone.  If you don’t already have EPL insurance, get it.  Nobody is good at hiring and inevitably you’re going to hire someone that you need to fire (you should adopt a hire slow, first fast mantra, but that’s another article).  No matter how amicable the firing was, there is risk that the person will come back and sue you: all it takes is them falling on hard times and a lawyer taking their case on contingency of which many of them do. 

 

I’ve come to believe that it’s not about avoiding getting sued, it’s about avoiding getting sued multiple times.  Do what you can to minimize the risk at all times and always be conscious of it.  If you’ve seen other situations or have advice, please feel free to add to this article in the comments section so we can all learn.  Of course, this article is not nor is it to be construed as legal advice, I'm not your attorney, and you should seek the advice of counsel for all matters (sorry for the disclaimer, don't want to get sued).

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