Lawsuit abuse is reason for worry. A survey conducted by the National Federation of Independent Business (NFIB), in conjunction with Sick of Lawsuits, found that 92 percent of small business owners in Florida believe that lawsuit abuse is stunting their growth. According to NFIB’s Florida Chapter, “Lawsuit abuse is turning Florida’s business climate into a climate of fear for small business owners.”
Now, 92 percent is a staggering number, but who doesn’t think lawsuit abuse is a problem? The answer is obvious. Most interesting, though, are the additional findings, and what follows is a discussion of these statistics under the purview of asset protection planning:
- 80 percent of small business owners are concerned that their business could be the target of a lawsuit.
- 37 percent have already been sued.
- 53 percent have been threatened with a lawsuit in the past.
- 26 percent have had to cancel plans to expand their workforce due to concerns about a potential lawsuit.
Note that here we are dealing with lawsuits and not solely lawsuit abuse, although it isn’t clear if these statistics distinguish meritless claims from non-meritless claims, or if lawsuits, as the survey might suggest, just means any lawsuit, abusive or warranted. In any event, it does not matter for our purposes, so back to regularly scheduled programming.
Business owners have every right to be worried. Lawsuits, especially lawsuit abuse, can paralyze commercial activity, thwart business development, threaten bankruptcy, and, as the survey reveals, “halt plans to expand, hire workers or offer new products.” Moreover, the consequences of litigation or potential litigation are magnified when the business itself is the primary source of income for the small business owner.
America’s litigious society, especially when combined with the prevalence of contingency based litigation and the mindset of the personal injury attorney, can be very costly to the business owner, even if the threat of litigation never materializes. This is why asset protection planning is so important.
Asset protection will give you peace of mind by placing your assets beyond the reach of your future potential creditors. And this placing can be literal or metaphorical, depending on your risk tolerance, line of work, and other factors, a discussion of which goes beyond the four corners of this article. All in all, a properly drafted asset protection structure will help you reduce risk, isolate any liabilities and, as a consequence thereto, promote settlement, frustrate the mindset of the plaintiffs’ lawyer and, at best, avoid litigation altogether.
In other words, asset protection is a type of risk management, but only so when done prophylactically. If you find yourself worrying about lawsuit abuse, or better said being abused by a lawsuit, arming yourself with asset protection can be your sword and shield.