Owning and operating a small business comes with its fair share of responsibility—and legal exposure. Many entrepreneurs pour their heart and soul into their business but are caught off guard when faced with a lawsuit. Legal challenges can come from almost any direction, including employees, clients, competitors, or even passersby.

While no one can predict every dispute, understanding the most common legal threats facing small businesses in the United States can help you stay prepared and protected. By addressing vulnerabilities early, small business owners can minimize risk and avoid costly litigation.

Here are five of the most frequent reasons small businesses end up in court, along with steps you can take to lower your legal risk.

1. Employee Disagreements and Workplace Issues

Employment-related lawsuits are one of the top reasons small businesses face legal trouble. These cases often stem from accusations like:

• Discrimination based on age, gender, race, or disability
• Unlawful termination
• Retaliation after reporting harassment or wrongdoing
• Wage violations (e.g., unpaid overtime)

Federal agencies like the Equal Employment Opportunity Commission (EEOC) and Department of Labor actively enforce these protections. Many states also have their own stricter laws.

How to Lower Your Risk:

• Draft a thorough employee handbook that reflects your policies and complies with the law
• Offer regular training for managers and staff on harassment, diversity, and wage laws
• Keep detailed records of payroll, performance, and employee concerns
• Consult an employment law attorney before making disciplinary decisions

2. Contract Disputes

Contracts are the foundation of most business relationships, but they can also be a major source of conflict. When one party fails to follow through—whether it's a supplier, service provider, or client—a breach of contract claim may follow.

Some disputes come from unclear terms, missed deadlines, or payments that fall through. Others arise from informal deals without written documentation.

How to Lower Your Risk:

• Always put agreements in writing, even with long-time vendors or friends
• Spell out deadlines, payment terms, scope of work, and procedures for resolving disputes
• Allow your attorney to review all contracts to identify risky or vague clauses
• Keep a clear paper trail of all communications and changes

3. Injuries on Business Premises

If someone slips, trips, or gets hurt while visiting your business, you could be held liable. Common causes include wet floors, poor lighting, cluttered walkways, and unsafe entryways.

These types of cases will fall under premises liability law, where property owners are liable for maintaining safe conditions on their property. Small businesses often overlook minor hazards—until a lawsuit lands on their desk.

How to Lower Your Risk:

• Inspect your property regularly and fix hazards promptly
• Document safety checks and maintenance efforts
• Post warning signs near temporary dangers (e.g., wet floors, construction areas)
• Carry general liability insurance to help cover potential claims

4. Intellectual Property Conflicts

Whether it’s using a logo that looks too similar to a competitor’s or unknowingly posting copyrighted material, IP disputes are more common than many small business owners realize. With digital content everywhere, it's easier than ever to infringe—intentionally or not.

IP lawsuits can involve trademarks, copyrights, patents, or trade secrets, and even a minor misstep can lead to costly legal action.

How to Lower Your Risk:

• Do a trademark search before branding a product or business name
• Don’t use images, music, or designs from the internet unless properly licensed
• Register your own brand assets to protect against copycats
• Consult an IP attorney if you receive a cease-and-desist letter

5. Defective Products or Poor Service Claims

If your business sells a product that causes harm—or provides a service that fails to meet reasonable expectations—you could face legal claims from consumers. Common accusations include:

• Manufacturing defects
• Failure to provide proper safety warnings or instructions
• Fraudulent advertising or broken promises

Even businesses that only offer services (like consulting, home repairs, or event planning) may be sued for errors or negligence.

How to Lower Your Risk:

• Put quality assurance systems in place throughout your production or service process
• Clearly explain any risks and provide safety information with all products
• Stay transparent in your marketing and avoid overpromising
• Carry product or professional liability insurance, depending on your industry

Call Brandon J. Broderick For Legal Help

At Brandon J. Broderick, Attorney at Law, we know that a single lawsuit can derail everything you’ve built. Whether you’re trying to resolve a legal issue or take preventive steps to protect your business, our experienced legal team is ready to help.

We offer straightforward advice and proven strategies in areas like employment law, contracts, liability claims, and business disputes. We’re here to support you so you can focus on growing your business with peace of mind.

If you’re facing legal uncertainty—or want to make sure you’re not missing something important—get in touch with us for a free consultation.