6 Advantages of a Legal Defense Fund

A legal defense fund helps organizations or individuals cover any legal expenses they accrue, including legal advice fees, court filings, lawyer fees, litigation fees, and more. Legal defense funds are considered nonprofit organizations. They may stand alone or exist under the umbrella of a larger organization.

Some of the earliest known legal defense funds in the United States came to be in the early days of the civil rights movement. Funds were gathered to ensure that those living in poverty or experiencing unfair treatment could afford a legal defense. Today, legal activists frequently establish emergency funds to assist with legal costs associated with human and animal rights issues. While some of the most famous legal defense funds are civil rights-oriented, such as the National Association for the Advancement of Colored People (NAACP) and the Women’s Equity Action League, there are various other purposes for defense funds. One such purpose is providing protection for a business entity.

Legal Defense for Your Firm

Many businesses – especially smaller ones – tend to overlook legal defense while busy with more pressing tasks. But just as there are disadvantages to in-house HR, handling legal issues alone can be risky. According to a Legal Shield study, “nearly 60% of small business owners who said they experienced a legal event in the past two years reported not hiring an attorney to help them.” 40% (or three million business owners) cited high costs as the reason they didn’t seek help. Sadly, many business owners aren’t getting the legal assistance they deserve merely because of financial fears.

Opting for a turnkey legal defense fund is one of the most proactive steps you can take to secure a healthy financial future for your firm. Additionally, those in riskier professions, such as the medical field, can benefit immensely from having an added layer of legal protection in the event of a conflict or accident. There are many advantages of a legal defense fund, with the following six factors being most notable.

Legal Defense Funds Are More Affordable

Since legal defense funds are considered nonprofit organizations, the money contributed is not seen as a financial investment on behalf of the assisting organizations. On the other hand, a lawsuit funding organization is usually oriented toward profit, which means the associated costs are often higher for small businesses and medical practices. This can make all the difference between an affordable legal solution and one that isn’t worth the trouble and fees.

Fund Members Can Contribute

A collection of 2014 data showed that between “36% and 53% of small businesses are involved in at least one litigation.” Since then, 2020 data shows several types of business lawsuits are on the rise, making legal defense increasingly critical for the resiliency of the average business.
A surefire way to empowerment is to exercise your power and take ownership of your firm.

Anyone who is a member of your legal defense fund can proactively contribute money on a regular basis. This establishes a healthy routine of contributing to your legal safety net without having to think about how to do it.

Legal Defense Funds Raise Money Quickly

The speed at which your funds can accrue money might surprise you. Compared to lawsuit funds, legal defense funds tend to raise money faster and at a much lower cost. Again, this is because lawsuit funds are profit-oriented, while defense funds are nonprofit. Since funds are given by members, legal redress costs are reduced. Even modest contributions add up quickly, and those who check their fund periodically are often encouraged by how much it has grown.

Legal Defense Funds Prepare You for Anything

Legal Shield’s study revealed, “more than 13 million, or nearly 60%, of all small businesses have experienced significant legal events in the past two years.” Among these were:

  • Debt collection
  • Contract review
  • Document review
  • Contractor/Supplier disputes
  • Internet security breaches
  • Product liability issues
  • Employee theft
  • Tax audits
  • Employee confidentiality issues
  • Threats of consumer lawsuits

Debt collection and contract reviews were the most common reasons business owners sought legal advising. Unfortunately, employee theft is another number that is trending upward, with global losses totaling around $2.9 trillion per year. It’s estimated that as many as 33% of corporate bankruptcies are at least partially caused by employee theft.

Perhaps the most crucial advantage of a legal defense fund is granting your firm safety and security regardless of what happens. If you want a bulletproof firm, opting for a fund is one of the most direct ways to get there. There is no way to predict the future, and most firms who end up in legal trouble would never have guessed they’d find themselves in that situation. While it sounds cliche, better safe than sorry applies heavily in the realm of law.

Legal Defense Funds Are Targeted

Unlike general lawsuit funds, legal defense funds are typically made up of members who share similar interests and goals. Thus they are mentally and financially motivated to defend the interests of fund holders. Membership tends not to fluctuate too much, which makes for predictable and steady contributions over time. In the end, it is better to have a team of legal experts and fund contributors who are personally invested in your firm for the long haul. This helps you establish long-term professional relationships and build trust.

How America’s Back Office Can Help

One of the biggest misconceptions is that most organizations don’t need defense funds. Most people only look into defense funding after a negative event, such as a lawsuit, has already occurred. By this point, they are far less likely to gain the funds and legal support they need in a timely manner. Similarly, the research shows that many small businesses avoid seeking legal advice assuming that it isn’t affordable. This can lead to poor decisions that a legal expert could have helped them prevent. Unfortunately, when blindsided by an unexpected legal situation, ignorance is just not enough of a defense in the courtroom.

At America’s Back Office, we understand the overwhelm that comes with juggling dozens of HR tasks and keeping up with tech advancements. Employees at small firms and practices are often too busy to think big-picture, causing critical issues like legal defense to slip through the cracks. We help you reduce corporate costs and liabilities by handling all aspects of HR so you can focus on growing your business. By handing your HR tasks off to experienced experts, you can ensure total compliance in your firm and a happier, more productive team of employees.