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Settling Small Business Claims in Small Claims Court

Every small business owner knows that controlling costs is the key to success, but when disputes arise between a business owner and his or her subcontractors, suppliers or customers, resolving those disputes can get costly. Recently, small claims courts have increased their dollar limits, which means that many routine disputes that a business owner may face can now be brought in small claims court. You'll not only save money from not paying lots of legal fees, but you can also save a lot of time which is just as important.

Dollar Limits for Small Business Claims

Many small claims courts have recently increased the dollar limits for disputes, but there is still a lot of variety between courts. Some courts still have relatively low dollar limits, $1,500 in Kentucky for instance, but many states have increased the amount to $15,000 and more (Delaware, Georgia, and Tennessee). Check with your local small claims court to find out what the maximum dispute amount is.

How Long You Have to File Your Small Business Claims

Like ordinary courts, small claims courts have statutes of limitation that set the deadline or maximum period of time within which a lawsuit or claim may be filed. The deadlines vary depending on the type of case and which state you are filing in. If you do not file before the statutory deadline, you will lose the right to your claim, so it is always a good practice to initiate your lawsuit relatively quickly before your right to sue expires. Filing suit can also move slow parties into action. Check with your local small claims court to find out how long you have to file your lawsuit before your right expires.

Where to File Your Small Business Claims

Generally, a small claims court action must be filed in the county in which the party being sued resides or does business. Alternatively, it can also be filed where a contract was signed. If the defendant doesn't do business in your state, this means you will likely end up suing them in their home state which may make the advantages of cost and time provided by small claims court less appealing.

Filing Your Small Business Claims

When you are ready to file your small court claims, here's an overview of the process:

  • Notice: Each defendant named in your lawsuit must be given notice, and you must arrange to serve each defendant a copy of the claim. The typical ways to serve someone are by certified mail via the court clerk, by personal service by a process server and by substitute service by a process server at the defendant's home or business.
  • Preparing: Prepare your arguments in a logical, sequential format, setting out the basic facts of the dispute and your arguments for why you are entitled to relief, damages, etc. Make heavy use of documentation where possible, and consider finding a witness or two if it makes sense. Organize everything into a"trial binder" that contains all of your notes and documents. It may also be helpful to go watch a small claims court trial to get a feeling for how they work.
  • Your Day in Court: Be early, be professional and be organized. Speak clearly to the judge, always answer his or her questions clearly and never speak over the judge or your opponent. You will get your turn to speak, so just take notes while the other party is speaking.

Finally, below are two of the most common reasons for taking your small business claims to small claims court and a brief overview of each.

Common Small Business Claims -- Collecting Bills

Collecting bills through the small claims court system can be extremely efficient and effective. A substantial amount of these cases aren't even contested because the defendant knows it owes you money and doesn't really have a defense. If the claim is uncontested, you win outright. This means that you have very little preparation work to do, and very little time is spent on the actual process. Bring to court hard evidence and documentation that the defendant owes you money. A judgment by the court gives you a lot of leverage, and allows you to collect in ways that would be unavailable to you without a court order.

Common Small Business Claims -- Resolving Disputes

Disputes between businesses and between business owners and contractors are extremely common. If you are unable to work out a solution on your own or through arbitration, then small claims court can make a lot of sense. When lawyers get involved, there's less of a chance you'll actually come out of the dispute ahead financially.

Most disputes of this type involve contractual disputes and complaints about workmanship and quality. If this is the case, gather all the evidence you have of what was required, and how the defendant failed to deliver on that promise. For example, if a contractor provided you with goods that were of substandard quality, you should first establish what the contract called for. Next, discuss why what was offered was substandard, and get testimony from someone who would be qualified that the good below the quality expected of such goods in your line of business. In addition to preparing your case, remember to also take into account what the other side will argue, and offer a rebuttal to your opponent's points.

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