If you start your own business, then maybe you’ll love it. You’re your own boss, and no one can tell you what to do. Maybe you’re doing something you feel passionate about. 

However, if someone sues you, or if you face a class action lawsuit, everything you worked for could disappear. That might sound harsh, but it’s true. You may recover from this situation, but it’s not easy, and sometimes, regardless of what you do, your business can fail. 

Let’s talk about how a lawsuit can ruin a thriving business venture.

What Occurs if Someone Wins a Lawsuit Against You?

Let’s say that someone sues you because you made a product that harmed them. You should test each product carefully before you let it get onto store shelves, but sometimes, even products that you tested extensively can fail in ways you didn’t expect once the public purchases them. 

If you lose the lawsuit, then you must probably pay this person economic damages, and possibly noneconomic ones as well. Several things fall into the economic damages category. 

They typically include lost wages if the person who your product harmed missed work for a while. They will also include medical bills if the plaintiff had to see a doctor at some point. 

They might include mortgage or rent payments in the economic damages category if they missed some of these payments while they recovered. They may also demand money for things like electric bills, gas bills, etc.

While these losses might add up to thousands of dollars, the noneconomic damages usually cost you much more if you’re on the losing end of a lawsuit. The person who your product harmed might come after you for pain and suffering. 

This legal term has a somewhat nebulous meaning. In a general sense, it means what the plaintiff experienced if your product hurt them or made them sick. 

It’s easy to put a price on economic losses, but seldom that simple with noneconomic ones. That’s because they’re not tangible losses to which you can instantly assign a price tag.

The plaintiff’s lawyer will usually look at precedent when determining how much their client should demand. Noneconomic losses can quickly add up, though. 

You might have to pay millions of dollars in some more extreme instances. To get to that point, though, the plaintiff must probably establish that your product caused permanent damage from which they will never wholly recover. 

What About if You Settle with Them?

Of course, nothing says you need to go to trial if someone sues your business. You can also get a lawyer and attempt to negotiate a settlement with the individual who’s suing you.

You may prefer this, and your lawyer might recommend it. If you can come to terms with the person suing you, then you can get this whole business behind you as quickly as possible, and hopefully you will avoid too much negative press. That negative attention on your business can hurt it as much as the financial ramifications if someone sues you, so you should at least consider this option.

Class Action Lawsuits

Maybe instead of a single person suing you because a product you made hurt them or made them sick, you instead harm many people with a faulty product. That’s when you may face a class action lawsuit. 

Many times, this kind of thing can wipe out a company. If you must settle with many individuals rather than just one, you can probably count on having to pay a lot more to satisfy all of the plaintiffs. 

If you own a huge company that’s highly profitable, then you might survive. A class action lawsuit that hits a smaller company can act as its death knell, though.

Your Employees Might Lose Faith in You

While the money you pay as a settlement or if you lose a lawsuit will definitely hurt your company, it might not wipe it out entirely. You may crunch the numbers and believe you can come back from this hit to your image without declaring bankruptcy. 

You might face a situation where your employees lost faith because of what happened, though. That often depends on how you react. 

If you try to put a positive spin on things, that can help. Maybe you will compose a speech and address the company. You can tell your workers that even though you made a mistake, you’re taking responsibility, and you’ll make sure to test each product much more carefully before you let it hit store shelves. 

However, maybe you’re facing a situation where a former employee brought a lawsuit for sexual harassment or discrimination. If that’s true, that can damage your company’s reputation even more. 

Any company can come out with a faulty product if it’s not careful enough with its testing. Something like a sexual harassment or discrimination lawsuit indicates problems with your company’s internal culture. Employees won’t like that, not just the ones you have right now, but ones you might hire in the future. 

The Public May Lose Faith as Well

If someone sues you, then you must try to bolster employee morale. However, you may also need to restore the public’s perception of you and your company.

You may have to hire a crisis management team. You might also find an individual who makes these situations their specialty. 

Whether you hire one person or a whole team, they might advise you to make a public statement. They may write it for you or help you write it.

You can call a press conference and tell the public that you’re going to do a better job with whatever issue caused the lawsuit. You will correct the company’s culture problem, test your products better, or do whatever else it takes.

Sometimes companies can come back from devastating lawsuits, but sometimes not. The monetary cost will certainly factor in, but your pure determination to save your company matters in these situations as well.