Can a lawsuit destroy a company?
Asked by: Clark Morar | Last update: December 25, 2025Score: 4.8/5 (5 votes)
As a small business owner, you face the risk of a lawsuit every day. It can cost money, time, your reputation and cause stress. Lawsuits can also put some companies out of business. It may not be possible to avoid every legal claim against your business, but it's important to limit your risk of a lawsuit.
What does a lawsuit do to a company?
A lawsuit can tie up your resources, damage your reputation, and even force you to close your doors. As you take steps to establish your business, understanding the potential ramifications of a lawsuit is essential.
What are the downsides of suing?
Upfront Costs and Expenses
Though we work on contingency, lawsuits have unavoidable costs – case expenses, legal fees if resolution fails, and the risk of paying defense fees in some instances. While unavoidable, expenses may be recovered upon a successful outcome, but they represent a financial risk.
What happens if you sue a company and they go out of business?
You must file your lawsuit against a dissolved company within the applicable statute of limitations. The statute of limitations is the time period within which you must file a lawsuit after your cause of action arises. In California, the statute of limitations for suing a dissolved company is four years.
Is it hard to get a job after suing a company?
A lawsuit could negatively affect you in a future job, though it should not under the law. If a Company refuses to hire you because you are asserting your legal rights under statutory employment laws, that failure to hire could be unlawful. You should discuss your concerns with your attorney.
How Your Business Can Survive A Lawsuit | Lawyer | Attorney | Small Business Insurance | Litigation
Can you lose your job over a lawsuit?
You can choose whether to stay with your employer after filing the lawsuit or move on to a different employer. While employers usually have the right to fire at-will employees for any reason, they cannot fire them in retaliation after filing many types of lawsuits.
Does suing affect my future employment?
In California, certain laws provide some degree of protection against employment discrimination based on one's involvement in litigation. Consulting with a legal team can help you to fully understand your rights and how best to protect future job prospects given your unique circumstances.
Is it worth it to sue a company?
You need to answer three fundamental -- and fairly obvious -- questions as part of deciding whether it's worthwhile to bring a lawsuit to court: Do I have a good case? Am I comfortable with the idea of a compromise settlement or going to mediation? Assuming a lawsuit is my best or only option, can I collect if I win?
What happens if you sue a company with no money?
Charges will still be made against the responsible party, whether they can pay or not because these are moral liability cases. The court may grant you the authority to seize some of their assets after the judgment, such as: Real property investment accounts.
Can you sue a company and still work there?
It might even give rise to potential conflicts in the workplace. California law, however, prohibits employers from retaliating against employees who engage in protected activities, including filing a lawsuit related to workplace issues.
Is it better to sue or settle?
Litigation takes time and often leads to more time due to appeals and retrials. You will have to be involved as the trial progresses. Whether you are the plaintiff or the defendant, if the total time spent in litigation is not worth a good outcome in court, then settlement is probably a better option.
What can you lose in a lawsuit?
If a creditor files a lawsuit against you and wins a judgment, they can seize quite a few assets. They can garnish your wages, levy your bank account, and even go after your personal property. This includes everything from cars and furniture to clothing and household goods.
Do companies prefer to settle out of court?
Settling is often cost-effective
Research has long indicated that settlements are more cost-effective in most cases. Even when businesses may assert that no wrongdoing occurred, settlements outside of court can be a means of limiting how much the lawsuit costs the organization.
Who pays in a lawsuit?
But it's more complicated. In the US, the rules can change depending on where you are and what kind of lawsuit it is. While each side usually pays its own legal fees (known as the American Rule), sometimes the court can make the person who loses pay some or all of the winner's lawyer fees and related costs.
Is filing a lawsuit worth it?
First, you must ask yourself if you have a good case. Second, you should ask whether you'd be satisfied with a settlement or going to dispute resolution if you file a lawsuit. Finally, assuming you win your lawsuit, you need to ask yourself whether you'll be able to collect any form of judgment.
Can a company ignore a lawsuit?
Ignoring a lawsuit can have severe, lasting consequences for your business: Financial consequences : The plaintiff may be awarded the full amount of damages they are seeking, regardless of whether those damages are exaggerated or unsupported by the facts.
What happens if you lose a lawsuit and can't pay Canada?
Normally you have 30 days to pay. You'll be charged interest if you don't pay within this time limit. Worse still, your salary or property could be seized.
Is it worth suing for defamation?
The answer is, yes, it is worth suing for defamation. When a true case of defamation exists, there are damages that are caused as a result. Those damages are compensable through a civil lawsuit, in California and beyond.
What happens if a company never pays you?
If the regular payday for the last pay period an employee worked has passed and the employee has not been paid, contact the Department of Labor's Wage and Hour Division or the state labor department. The Department also has mechanisms in place for the recovery of back wages.
How much money is enough to sue?
In general, claims are limited to disputes up to $5,000. However, natural persons (individuals) can claim up to $10,000. Corporations, partnerships, unincorporated associations, governmental bodies, and other legal entities cannot claim more than $5,000.
Should you tell someone you're suing them?
After you file your lawsuit, you have to let the defendant know that you are suing them. Usually, the defendant knows about the case a long time before it starts. Hopefully you talked to the defendant and tried to settle the case before you filed.
When should you sue a company?
Common bases for suing a company include breach of contract, negligence, product liability, employment discrimination, and fraud. Be sure to have all relevant documents and evidence to support your claim.
Is it hard to find a job after suing a company?
Most people in this position often ask, “Can I be denied a job because I sued my last employer?” The answer is no. They might be less inclined to hire you because of your current legal circumstances, but they cannot base their decision on a lawsuit.
Should I quit my job if I'm suing them?
Important Things to Note
First, it is essential to note that you can continue working for your employer after filing a claim against them. Whether your case against your employer alleges unpaid wages, any form of discrimination, or harassment, you still have the option to continue working.
Can a company fire you for suing them?
Retaliation Is Illegal
Importantly, the outcome of the lawsuit also has no bearing on whether or not your employer can terminate you. Even if you lost your case against the company, your employer can't use its victory as a shield or justification to fire you.