Be prepared if you serve, or are served with, a claim

When you have a small business, finding out that you have a claim against you is frustrating. It may be costly as well. Fortunately, most claims don't actually reach court. You may be able to settle a claim or resolve it by working out a solution with the other party.

There are dollar limits on small-business claims, so that's one good thing about having a small business and not a larger corporation. Small claims are limited to $3,000 in village and town courts in New York, while city courts see up to $5,000 claims in small claims courts.

Since the claim limit is fairly low, you can usually resolve your case for this amount or less in a worst-case scenario. Settlement offers can be made for any amount, depending on the specific situation. The claim will likely be filed in the county where you reside or do business. If you are between two counties, make sure you know the limits in each county and where you're being sued.

What happens when someone files a small-business claim?

A small-business claim is started by providing notice to the defendants. This gives the defendants time to reach out and resolve the case before it goes into the legal system. You'll receive a copy of the claim through a process service or substitute service. Some are through certified mail via the court clerk.

After this, you'll have time to prepare a defense if you're served with the claim or arguments if you're the one filing the claim. You need to collect documents and find witnesses who can support your side of the story involving the claim.

Some people go as far as to go to a small-claims court to watch a trial, so they can see exactly what kinds of evidence are needed and how the process works. Your attorney will give you an overview of what you can expect.

When the day comes that you're in court, you'll be able to leave the claim uncontested or contest it. If you contest, or the other party contests, a claim, then you will go to trial. If not, then the person who filed the claim automatically wins their case. If you go to trial and lose against a claimant, you end up paying. If you win, you won't have to pay for the claim against you.