The risk of litigation: steps a business can take to minimize it.

• Author: Jorgensen, James L.
• Position: Indiana SMALL * BUSINESS REFERENCE * GUIDE - Brief article

The cost of litigation--both in time lost and monies expended--can have a crippling effect on a business. business can take to minimize the risk of litigation. Let's examine two of them.

Intra-business lawsuits can flow from a falling out between owners. In part, the risk of these claims can be minimized by a well-crafted buy-sell agreement signed by the equity owners. Assume the business has two equal owners. In order to prevent a deadlock if the two owners cannot agree, the buy-sell agreement can provide that at any time, one owner can offer to buy out the interest of the other. The agreement would further provide that the owner to whom the offer is made must either accept it or must buy out the interest of the offering owner at the same price and on the same terms. A provision like this forces the owners to treat one another fairly: the initial offer may be turned back against the offeror.

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