Successful small business owners, with skills ranging from carpentry to computers to the art of deal-making, share a willingness to shun the 9 to 5 routine and create an enterprise built on their unique skills and a lot of hard work. They also share a determination to get the job done and a willingness to wear many hats from accounting to sales and all points in be- tween. Yet, the entrepreneurial impulse that urges a small business owner to jump in to the work, resolve any problems that arise, and do what it takes to make customers happy can be very costly when things don’t go so smoothly and disputes arise.
Business owners can best protect the fruits of their hard work by taking some crucial steps on their own behalf before a dispute occurs, and they need to know how to respond effectively to protect their interests if one does, according to Philip Hammers- ley of Norton, Hammersley, Lopez & Skokos, P.A., a Martindale-Hubbell® AV Preeminent® peer rated attorney whose practice is in complex construction, commercial, trust and estate, and real property litigation. “In this day and age, it’s more than likely at some point in your business life, you will get into a dispute,” Hammersley said. “We advise people to be proactive in setting themselves up for success and to avoid most problems.”
A self-evaluation of the business, starting with the business structure is the place to begin. Is it a sole proprietorship, C or S Corporation, or a limited liability corporation? Other than sole proprietorship, each of these entities offers some degree of personal liability protection in the event of a legal dispute, as well as having certain business succession and taxation implications. For example, Hammersley said
his firm recommends that developers and investors who buy and sell real estate set up separate legal entities for each individual deal, so if problems arise with one, it does not impact the others. While every business has its unique circumstances, some things remain the same. “All businesses need protection from the start whether we’re talking about a small contractor with a tool box and a truck or a real estate developer,” says Darren Inverso, a Shareholder of Norton Hammersley, whose practice includes complex contract disputes, real estate and development litigation, construction defect and design litigation, condominium disputes, and corporate and partnership disputes.
Considering how the business is being engaged for service, which involves setting up contracts and other forms properly, is the next step in proactively heading off disputes. Ideally, contracts should out- line the scope of the work that will and will not be performed as well as those things for which the customer or others are responsible. “Otherwise, people make assumptions, such as their Realtor will handle everything from soup to nuts, when by law they are only allowed to do certain things,” Inverso said. Contracts also should include clauses that spell out how any potential disputes and resulting legal fees will be handled. “When it comes to contract agreements that spell out how resolution will be reached in a dispute, Florida courts have ruled that arbitration and mediation clauses are generally enforce- able, and if arbitration is out, then you’re looking at the courthouse for resolution,” he added.
Another benefit of having these basic business instruments in place is that they lay the groundwork for a relationship with an attorney whom owners can call if needed for early counsel that may head off a problem or minimize risk. That highlights one of the biggest mistakes that people make in a business dispute: trying to handle it by themselves. “People generally know when a problem is brewing. If we get involved early, we can look at different ways to resolve the issue, starting with sitting down at the table to work things out, or if we can’t accomplish that ourselves, we may bring in a mediator early on as opposed to after someone has spent two years and $100,000 in legal fees,” said Hammersley, who also is a Florida Supreme Court Certified Mediator.
People delay seeking counsel often because they don’t want to incur legal fees. However, in an effort to save money by resolving the situation themselves, they very well may wind up paying more, maybe much more, in the long run. “Just don’t wait until it is too late and miss an opportunity to deal with problems early. The longer it goes on, the more expensive it can be to resolve,” Inverso says. “Plus, in trying to deal with the issue, sometimes owners have taken action that made it worse. When you get a demand letter or someone says they are not going to pay, go see a lawyer. We’re going to assess the strengths and weaknesses of our client’s situation and his or her potential liability, look at the most economical way to resolve it, and develop a strategy that will get us there.” Experienced attorneys also will look at all aspects of the problem to ensure their clients’ interests are covered. If not, the consequences can be significant. “Someone may complain about an equipment installation, and it is critical to get the manufacturer involved early because it may not be the installer’s fault. While fixing the problem and making the customer happy are important, it also is important not to do anything to limit another party’s involvement,” Hammersley said.
“Insurance is another matter. If the insurer is not notified in a timely fashion, it may nullify the coverage.”
Arguably, one of the best reasons for getting an attorney involved is that, once both parties have representation, it helps remove the emotion from the equation. “We look at it as a business decision, and what is the most businesslike way to approach it,” Inverso said. “People are very passionate about what they do, and a dispute can turn into having to be right versus doing what is right.” If the dispute is far enough along that sitting down together to work things out is not an option, mediation is often recommended, but people may resist it for reasons ranging from past experience to a feeling that it shows weakness or a desire for vengeance. The reality is that if a lawsuit is filed, a judge will order mediation anyway, he added.
When dealing with a dispute, legal fees are only part of the cost. Less tangible, but carrying at least as much impact, are the time owners spend resolving the dispute rather than working on their businesses along with the potential impact on personal finances. “An advantage of working with a multidiscipline law firm is that we have the ability to walk down the hall to consult with tax or estate planners and asset protection experts,” Hammersley said. “That way we make sure our strategies take into account accounting or tax issues.”
Should the case go forward to court, an experienced litigator who can pull together the requisite expertise to represent clients most effectively is a business owner’s best hope for a favorable outcome. After that, his or her fate is in the hands of the court. Never getting to that point in the first place ensures business owners can keep their dollars and their talents focused on building a thriving enterprise.
Connect: Norton, Hammersley, Lopez & Skokos | 1819 Main Street, Sarasota, FL 34236 | 941-954-4691