Years ago, I became interested in podcasts to listen to during my daily commute. Podcasts quickly became the way I stayed up to date on news, entertained by true crime dramas, or expand my knowledge and expertise. Most recently, I was listening to The Real Estate InvestHER Show, which is co-hosted by Liz Faircloth and Andresa Guidelli. The show centers around female real estate investors sharing practical tools, lessons, and other information for growing a rental portfolio, flipping houses, and developing a mindset that allows them to run a successful business while balancing their personal lives. In one of their more recent episodes, they shared some interesting points on how to powerfully handle a lawsuit that I wanted to expand on as the principles shared can apply to many businesses outside of real estate.

1. Lawsuits are just part of doing business

Their Take: “If you are growing your business (and your portfolio) . . .  you will face a lawsuit at some point, that’s just part of doing business.”

As carefully as you plan, sometimes things go wrong because it’s nearly impossible to prepare for everything. By the time a dispute ends up in litigation, it is likely that the parties could not resolve the issue between themselves first. The larger your business grows, the more exposure you have, and therefore the potential for something to go wrong that cannot be smoothed over with a compromise. The podcast goes as far as to say to you should celebrate being sued, at least from the perspective that you are big enough to get sued. To take the emotion out of it, sometimes you have to chalk it up to the cost of doing business.

2. Protect Your Assets

Their Take: “Highly recommend [having] a conversation with an attorney about what you are looking to do. Asset protection to me is very very important, otherwise you are just going to keep putting out fires. And I [would] rather pay for an attorney to review a contract than miss something very important that I would have to pay much much more after that.”

  • Take the time to do it right up front. Be careful about forms you can download for free from the internet as they might not be right for your state or may not have those “extra paragraphs” which come from experience that will strengthen your protection. Having your contract drafted or reviewed by an attorney can help you avoid a costly mistake.
  • Everyone’s situation is different and there is no cookie cutter approach to asset protection. If you don’t invest in some sort of individual asset protection, you are definitely not doing all you can to avoid a lawsuit. A proper asset protection strategy prevents all of your assets from being seized by somebody if there happens to be a judgement. When attorneys evaluate for their clients on whether to bring a lawsuit, they evaluate how much they are going to be able to collect on the judgment at the end. If anybody is looking to sue you personally, how much you own can significantly impact you.

3. Your Lawsuit Doesn’t Define You

Their Take: “You are not your lawsuit, things can happen.”

  • Your business is very personal to you, you become the business and the brand. However, when forced into litigation, it can feel that you are personally being attacked. The benefit of having an attorney is that they will take the emotion out of it and look at the situation — and the evidence — the way the court is going to look at it and will give you an honest answer about the strength of your case. It is important to keep in mind that sometimes, even with a strong case, it takes a lot of time, effort and money to get to a resolution and prove you were right. A good attorney will tell you when you should fight to the end or if it doesn’t make sound business sense.

4. Lawsuits Are Powerful Lessons

Their Take: “If you don’t learn from your lawsuits, you are going to do it again.”

  • As stressful as it is to go through a litigation, you have an opportunity to learn and grow, and go through the paces of really thinking about costs and benefits of certain decisions. A lawsuit will also test your partnerships and make you see if you are partnering with someone that is aligned with you, or if your different skills help balance each other.
  • A lawsuit will also likely teach you that you should document (and keep) a lot more than you already are. Memories fade, conversations get twisted after the fact, and he-said-she-said situations are difficult to prove. Proper documentation that disproves trumped up allegations can get a lawsuit dismissed early on.

Generally speaking, when you have a lawsuit on your hand, it is best to leave the emotion out of it and look at it as the cost of doing business. The best way to do that is to determine how you want to resolve the situation and move along, move forward, and learn the lesson.

If you have questions about asset protection, contracts, starting or defending a lawsuit and are wondering how to proceed, please contact Paula Miller at pmiller@pkboston.com or (508) 807-1131 for a consultation.