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IncSmart Wiki is an encylopedia about everything related to Corporations and Limited Liability Companies.

Guaranteed Ways to Get SuedEdit

If you are in business, you are taking risks. The TOP TEN ways people get sued are listed below. Learn the mistakes and avoid them. Remember, there are over 80 million lawsuits filed in the United States every year.


1 - Being a SOLE PROPRIETOR

You might start off your new business as a SOLE PROPRIETOR, but don't stay that way long. There is no protection for you and your family, not to mention the poor tax benefits. If your company - (you) get sued, all your personal assets are at risk

2 - Being in a GENERAL PARTNERSHIP

Being in business as a partner is worse than being in business as a sole proprietor. You can not control what your partner does, and everything he does, you can be held liable for, even if your partner files for bankruptcy. If you want partners, create an LLC.

3 - Not staying COMPLIANT

Corporation work if you use them correctly. There are formal requirements. Don't take your newly formed company and toss it on your shelf and forget about it. The IRS can audit you as well and require you to pay back the taxes you thought you were saving.

4 - PERSONAL GUARANTEES

For some loans, a bank will make you sign personally. If you can't negotiate a deal without your personal guarantee, then refuse. And there is never a reason you should ever let your spouse co-sign as well.

5 - Adequate INSURANCE

Insurance will protect you in most cases. If the insurance does not cover the claim, people may go after your personal or unincorporated assets. Don't forget, insurance also acts as your attorney if you are sued.

6 - SEXUAL HARASSMENTat work

If you own a company with employees, Even if you are not the one harassing, you will be held liable for the harassing environment. Make sure harassment is in your company policies. Problems arise from picnics and parties.

7 - Using INDEPENDENT CONTRACTORS

The law presumes someone is a employee by these factors. Did they work your hours or theirs? Did they use your tools or did they have their own? Do they work for other people or just for you? Did you supervise their work? Did you pay him daily/weekly or upon completion? Was there a written contract?

8 - Keeping DOCUMENTATION

The written work is the most powerful weapon in court. Always follow up meetings and conversations with "Follow UP" letters. Failure to object to it's contents is an admission of what the letter states.

9 - Too much INFORMATION

If you are involved in what could become a lawsuit, keep your legal positions between you and your attorney. Successful litigation involves some element of surprise. State firmly that you intend to pursue your legal remedies, nothing more.

10 - All your eggs in ONE CORPORATION

An INC or LLC will shield your personal assets, but not the business assets. If you have debt free equipment or real estate,spread the risk between several entities. Have your business lease back the equipment.

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