Tag: Business Law

What nobody wants to talk about – but every business owner needs to understand.

 

The Scenario That Makes Your Blood Boil

Picture this: You’re facing a potential lawsuit. You have the evidence. You have the law on your side. You would likely win in court. Then the other side’s lawyer calls with an offer that makes you want to throw your phone across the room:

“We’ll settle for $20,000. It’s going to cost your client a lot more than that to defend this anyway.”

GRRRRR. Frustrating? Absolutely. But also… probably true.

Here’s what I want you to understand: This moment isn’t about being taken advantage of. It’s about you exercising control over your business.

 

Reframing the “Loss” as a Win

Let’s get one thing crystal clear: You always get to decide how this goes.

If you want to go to trial, it’s your right and your lawyer should absolutely follow your wishes. But from one business owner to another, let me share a different way to think about this moment.

Litigation is a business decision. This isn’t about right or wrong. This isn’t about justice or fairness.  Just a business decision.

 

The Real Math Nobody Talks About

When you’re calculating the cost of litigation, most people only think about attorney’s fees. But the real cost includes:

Financial Impact:

  • Legal fees (often 2-3x the settlement amount)
  • Time away from revenue-generating activities
  • Potential expert witness costs
  • Discovery expenses

Hidden Business Costs:

  • Your mental energy focused on litigation instead of growth
  • Stress affecting your decision-making in other areas
  • Team members pulled into depositions and document production
  • The opportunity cost of what you could have accomplished instead

Personal Toll:

  • Sleepless nights thinking about court dates instead of business strategy
  • The emotional drain that affects every other aspect of your life
  • The distraction that keeps you from being fully present for your business

 

The Power of “No Admission of Wrongdoing”

Here’s something crucial: Settlement doesn’t mean you’re admitting fault.

A properly drafted settlement agreement includes language stating there’s no admission of wrongdoing by either party. You’re not saying “you’re right and I was wrong.” You’re saying “this isn’t worth my time and energy.”

Completely different message.

 

Timing Is Everything: The Two Windows

There are actually two opportunities to make this business decision, and the timing matters more than most people realize:

Window #1: Pre-Filing Settlement

  • Clean resolution with no public record
  • Business reputation remains intact
  • Faster resolution
  • Often lower settlement amounts

Window #2: Post-Filing Settlement

  • Court record exists permanently
  • Public access to complaint details
  • Customers, competitors, vendors can all see it
  • Higher costs, more complexity

The key insight: Once that complaint is filed, it’s out there forever. Even if you settle the next day, the court record remains. But handle it at the notice or demand stage? It’s like it never happened.

 

Your Strategic Advantage

You have more control over this process than you think – if you know when to exercise it.

Before filing: You can resolve this quietly, completely, and move on with your business focused on what matters.

After filing: You’re playing defense in a public arena with a permanent record.

The Settlement Agreement: Your Shield Going Forward

A proper settlement agreement doesn’t just end the current dispute – it protects you from this issue coming up again with this person. The right language creates a comprehensive release that prevents the same claims from being raised in the future.

This isn’t just buying peace for today. It’s buying permanent protection.

 

The Real Question

The question isn’t “Should I fight this because I’m right?”

The question is “What’s the smartest business decision that protects my company, my energy, and my future?”

Sometimes the answer is to fight. Sometimes it’s to settle and move on. Both can be the right choice – it depends on your specific situation, your business goals, and what matters most to you.

 

Your Power, Your Choice

Remember: This is your decision to make. Your lawyer can advise you on the legal merits and likely outcomes, but you’re the one who decides what’s best for your business.

If you choose to settle, you’re not giving up or giving in. You’re making a strategic business decision to protect your most valuable resources: your time, your energy, and your focus.

You’re choosing to put your energy where it can actually grow your business instead of where it just protects your ego.

And sometimes, that’s the biggest win of all.

The goal isn’t to always avoid litigation – it’s to approach it strategically, with full understanding of your options and control over your choices.

Don’t wait until you’re in the middle of a heated dispute to figure out what to say and do. I’ve created a step-by-step checklist that walks you through exactly how to handle business disputes professionally—from that first angry phone call through resolution.

The “How to Handle a Business Dispute with Grace” checklist includes:

  • What to document immediately (and what NOT to say)
  • When to involve legal counsel
  • How to recognize when someone is acting in bad faith
  • Strategic communication that resolves issues without admitting liability

Download your free checklist here and keep it handy for when emotions run high and you need a clear plan to follow.

 

Photo Credit: Picpedia.com

Last month, a client called me in a panic. A customer was threatening to sue over a $4,000 project gone wrong. “What do I do?” she asked. “I already told them I’d make it right and refund everything. Will that stop the lawsuit?”

It was too late. She’d already made the classic mistake that turns manageable disputes into expensive legal battles.

Here’s what most business owners don’t realize: you’re not just running a business—you’re wearing a target.

The Reality About Business Disputes

The statistics are sobering. Research shows that business litigation impacts 36% to 53% of small businesses annually, with roughly 45% of small companies currently dealing with some form of legal dispute. Even more striking? 90% of all businesses will face a lawsuit at some point.

But here’s the part that keeps me up at night: most of these disputes could have been handled differently if the business owner had known what to do in those critical first 24 hours.

Why This Matters: The average cost to defend a lawsuit ranges from $3,000 to $150,000. Even if you do everything right. Even if there isn’t a strong case. Even if at the end, “you win.” And in many jurisdictions, including California where I defend business owners, the business MUST have a lawyer.  As the owner, you cannot proceed on your own, “pro se” or “pro per.” So, there are legal fees and filing fees even if you end up with a settlement or if the case is ultimately dismissed.   

Why Consumers Target Businesses (And It’s Not What You Think)

There’s a legal concept called the “deep pocket theory.” Simply put, when someone feels wronged, they’re more likely to sue the party they perceive as having money to pay—regardless of who’s actually at fault.

What consumers assume about your business:

  • You have business insurance that covers everything
  • You have cash reserves or “deep pockets”
  • Legal costs are just “business expenses” to you
  • You have lawyers on retainer ready to fight

The reality: Small business owners often have more personal financial exposure than the individual customers suing them. But perception drives litigation decisions, not reality.

This means that handling disputes isn’t just about customer service—it’s about legal strategy. The same response that works great for a negative Yelp review can be a disaster in a potential legal dispute.

The Moment Everything Changes

I’ve seen it happen dozens of times. A business owner gets an angry email or confrontational phone call. Their instinct is to:

  • Apologize immediately
  • Offer to “make things right”
  • Try to fix the problem over text or social media
  • Admit fault to de-escalate the situation

Every single one of these responses can be used against you in court.

That apologetic email you sent to calm down an angry customer? It can be presented as an admission of liability. The quick offer to refund everything? It might be seen as evidence that you knew you were in the wrong. The casual “I didn’t mean for that to happen” text? That’s an admission that can cost you thousands.

What Professional Dispute Response Actually Looks Like

The businesses that rarely end up in my office for litigation defense aren’t lucky—they’re strategic. They understand that the goal isn’t to avoid all disputes (impossible), but to handle them in a way that prevents escalation.

Professional dispute response has four key elements:

1. Immediate Documentation Before you say or write anything, preserve every piece of evidence. Screenshots, email threads, contract terms, payment records—everything. If it’s not documented, it can be twisted or forgotten later.

2. Strategic Silence Your gut will tell you to respond immediately. Resist. Taking 24-48 hours to craft a thoughtful response prevents emotional reactions that often make situations worse.

3. Professional Communication When you do respond, everything goes in writing, and every word is chosen carefully. You can be empathetic without admitting fault. You can be solution-oriented without accepting liability.

4. Early Legal Consultation This doesn’t mean lawyering up immediately. It means getting a quick strategic consultation to understand your real risks and options before the situation spirals.

The Grace Factor: Why Professional Response Reduces Lawsuits

Here’s something most business owners don’t realize; how you handle disputes affects whether you get sued in the future. Businesses known for professional, fair dispute resolution become less attractive targets for opportunistic litigation.

When you respond with grace under pressure, you’re not just resolving the immediate issue—you’re building a reputation that protects you from future legal problems. Word spreads in communities and industries. Customers and competitors notice how you handle conflict.

Your Next Steps

If you’re reading this and thinking “I need to be better prepared,” you’re right. The time to develop your dispute response plan is before you need it, not when someone is threatening legal action.

Every business owner should have:

  • A clear documentation system for disputes
  • Templates for professional dispute communication
  • A relationship with a business attorney for quick consultations
  • A step-by-step plan for those critical first 24 hours

The good news? None of this is complicated. It just requires knowing what to do and having the discipline to follow the plan when emotions are running high.

Download Your Business Dispute Response Plan

I’ve created a practical, step-by-step checklist that walks you through exactly how to handle business disputes professionally and strategically. It’s the same framework I recommend to all my clients—and it’s designed to help you protect your business while maintaining your professional reputation.

The checklist covers:

  • What to document immediately (and how)
  • When to respond (and when to wait)
  • How to communicate without admitting liability
  • When to involve legal counsel
  • How to negotiate professionally if needed

Download your free “How to Handle a Business Dispute with Grace” checklist here. Print it, bookmark it, and keep it handy—because when disputes happen, you’ll want to have a clear plan to follow.

Remember: You can’t prevent all business disputes, but you can control how you respond to them. And how you respond today determines whether small problems stay small or become expensive legal battles.

Photo Credit: Photo by Kampus Production: https://www.pexels.com

Ready to bulletproof your business against legal disputes? Beyond just handling disputes, smart business owners proactively protect themselves with the right contracts, policies, and legal structures. If you’re interested in a comprehensive business protection strategy, let’s talk about how we can help you build a legal foundation that prevents problems before they start.

Running a business without written agreements puts you and your clients at risk for misunderstandings, missed payments, and legal disputes. It’s especially risky in today’s landscape, where chargebacks (where clients dispute charges through their credit card company) can result in the loss of money even if your policy is “no refunds.” Without a written agreement, you’ll likely be forced to refund payments—regardless of your stated policies.

The truth is, contracts, or as I like to call them, business agreements, don’t have to be complicated, written in legalese, or span 20 pages to be enforceable. What they need to be is yours—clear, written in simple language, customized to your needs, and signed by both parties. When I say don’t “copy/paste,” I mean just that. Yes, you can follow templates, but don’t insert language you don’t understand just because it looks professional.  

*** Required disclaimer: This is not legal advice, meant for educational purposes only, if you have a contract matter- please discuss with an attorney***

Okay, now on to our discussion. 

Here’s what your agreements should include:

1. Be Clear and Keep It Simple

Nobody likes legalese—trust me, nobody. Skip the formal jargon. If the agreement is for six months, say that directly. If there are four monthly payments, spell that out. People want clarity, and your agreement doesn’t need to be fancy to be enforceable. In fact, you can have a legally binding agreement on a napkin (there’s a famous case about this!). But, for professionalism’s sake, keep it concise and clear.

2. Use the QTIPS Framework

To ensure all bases are covered, use the QTIPS framework to guide you in writing your agreements:

  • Q: Quantity (6 sessions, 2 products, etc.)

  • T: Time of Performance (15 days, 6 months, etc.)

  • I: Identity of the Parties (Who’s involved? You and your client? Identify them!)

  • P: Price (What is the cost of the services/products?)

  • S: Subject Matter (What are they buying? Coaching? Products? Services?)

With this in place, there’s little room for confusion. For example: “This agreement between Me and You is for six 30-minute life coaching sessions over six weeks for $350.” All terms are clearly laid out.

3. Spell Out Your terms

This is a common area where business owners often leave gaps that later create headaches. If you have a no-refund term, write it down. If there are time restrictions for rescheduling (e.g., within 48 hours), state that upfront. Similarly, if you require deposits, payment in full before certain services, or have any other terms, include them in your agreement.

It’s far better to have customers review your contract terms before purchasing, rather than dealing with disputes later. Trust me, it’s less stressful to turn someone down upfront than to face a chargeback down the line.  And without getting too legally for you, we often treat policies and contract terms as different. 

Generally, we describe policies as applying to everyone equally in your business, regardless of the products or services they contract for.  “Our policy is to require 48 hours’ notice to change an appointment.” But a contract is between you and the other party specifically (QTIPS). You can negotiate a term. “I’m requesting the option to provide 24 hours’ notice to you due to the nature of my business.”  That term can be negotiated in an agreement between the two of you. 

So, if you are relying on your websites’ policies to fight a chargeback or otherwise prevent a refund, and it is not a term in the contract, there might be some stickiness with certain payment platforms or credit card issuers.  Please check with an attorney if you need guidance in this area. Us lawyers had weeks and weeks and weeks and weeks of law school and legal cases to read (I know, I’m exaggerating, or am I?) on the exciting world of contract terms. Exploring the exotic world of, “what terms are included in this scenario? That one? Is that an Oxford comma?”

4. Get Any Changes in Writing

Changes will happen. Whether it’s a change of schedule or an amendment to services, always get the changes in writing. Even something informal like, “We’ve agreed to change the dates for yoga sessions” should be clearly documented.

At a MINIMUM send an email documenting the changes to the agreement. You can send an, “I’m just following up our phone conversation with this email to ensure we have everything clearly documented……”  At the end of the email., “If you see something I left out or need to change, please hit reply and let me know.  It was great speaking with you earlier today.” Please do this as you get off the phone- not two days later. If you know that you will not get to it right away, have excellent notes. 

Even better? Send over the changes in a separate document, and you both sign.  Create a word document, send it to the other side, once it’s absolutely captured the changes, make a .PDF, send for signature or e-sign. As much as possible, keep everything signed and dated to avoid confusion.  Don’t rely on memory or scribbles on your notepad—put it in a formal writing!

5. Be Prepared to Enforce the Agreement

This part of business isn’t easy, but it’s necessary. You have to be prepared to enforce your agreements if the need arises. In my own business, I allow clients to pause services for a month or two if life happens—but we don’t just “cancel” agreements because life got in the way. We finish what we agreed to. My livelihood depends on it, and your business should be treated with the same respect.

You may never need to enforce an agreement, but if it comes to that, be firm. Ensure your agreements are followed and recognized.

6. Get Professional Legal Review for Complex Agreements

For more complex agreements, like buying or selling a business, purchasing or leasing equipment, or drafting partnership agreements, always consult an attorney. These types of agreements often involve significant risks, and it’s essential to get them right from the start.

If you can’t afford a full-time attorney or don’t want to hire someone long-term, there’s an excellent online resource called Contracts Counsel. This platform allows you to hire attorneys on a project basis to review or draft legal agreements tailored to your specific needs. It’s an affordable way to ensure your legal documents are in top shape.

A Final Note

While hiring an attorney may seem like an extra step, it’s an investment in the long-term stability and success of your business. Having a clear, legally binding agreement not only protects you but also gives your clients peace of mind, knowing that both parties are aligned in terms of expectations. Don’t let a misunderstanding or poorly crafted contract harm your business—take control of your agreements and protect your interests.

For California Business Owners

If you’re a small business owner in California and need help reviewing or drafting your contracts, I’m here to help. Reach out for a consultation, and we’ll ensure your agreements are legally sound and protect your business.

There’s a lot of buzz online about forming a Limited Liability Company (LLC) when starting a business—but before you dive in, it’s important to know: not everyone needs to rush into creating one.

Yes, an LLC can offer protection by separating your personal assets from your business liabilities. But forming one is more than just filling out paperwork—it comes with ongoing responsibilities, costs, and some legal realities that many business owners aren’t fully aware of.

Here’s what you need to know before you decide if an LLC is right for you:

1. You’re Creating a New Legal Entity

When you form an LLC, you’re establishing a brand-new legal “person” in the eyes of the law. You (and any business partners) become “members,” and the LLC becomes its own entity—typically a citizen of the state where it’s formed.

Even if you’re a solo entrepreneur, the LLC is not you. It needs to be treated accordingly. That means:

  • Filing renewals or reports annually (rules vary by state)

  • Getting a separate EIN (Employer Identification Number)

  • Opening dedicated business bank accounts

  • Keeping your business and personal finances completely separate

This isn’t optional. It’s the foundation of the legal protections an LLC offers.

2. Business Finances Must Be Kept Separate

This is where many business owners slip up. The LLC structure can protect your personal assets—but only if you treat the business like a separate entity in practice, not just on paper.

That means:

  • Paying yourself properly, via paycheck or owner’s draw

  • Avoiding using the business debit card for personal expenses (ever)

  • Documenting transactions clearly and maintaining clean records

If you mix personal and business finances, you risk “piercing the corporate veil,” meaning a court could disregard your LLC and hold you personally liable. In short: if you don’t treat the LLC as separate, neither will the law.

3. Tax Benefits Aren’t Always Immediate

LLCs can offer potential tax benefits—but these depend on how the entity is structured and how much revenue the business generates.

For example, electing to have your LLC taxed as an S-Corp may reduce self-employment taxes once your profits hit a certain threshold. But if your business isn’t generating significant income yet, the difference may be minimal.

Talk to a tax professional before choosing a structure—what works for one business may not make sense for yours.

Understand the Benefits and the Costs

Online platforms make LLC formation seem quick and easy—which it can be. But they often don’t mention the hidden costs of maintenance and compliance.

In some states, LLC renewals and franchise taxes are expensive. One of my clients, for example, pays $800 annually just to keep her LLC active.

Before forming an LLC, ask yourself:

  • What assets am I protecting?

  • What are my state’s annual fees and reporting requirements?

  • At my current income level, are there any real tax advantages?

Final Thoughts

Forming an LLC can be a smart move—but it’s not the only path to legitimacy or success in business. Make sure you understand the responsibilities and the financial impact before moving forward.

Talk to a tax professional or legal advisor who understands your business. And don’t be afraid to start as a sole proprietor while you build. There’s nothing wrong with laying a solid foundation first.