It doesn’t matter if you only just finished your business’s ribbon-cutting or have decades of experience under your belt, the complexity of the legal system practically ensures that some business will blunder into legal hot water. Have you taken the steps necessary to ensure that it not be yours?
My years as a small business attorney have handed me countless cases of well-meaning business owners that made genuine mistakes, giving me first-hand experience in not only cleaning up the mess after the fact, but how to ward against it, too. With that in mind, here are the four most common legal mistakes that even the most seasoned entrepreneur might fall victim to:
Mixing Oil and Water
Okay, the analogy isn’t perfect–your business and personal finances do mix extremely easily. In fact, many small business owners get their start and achieve all of their early growth with personal and business assets not just intermingled, but practically indistinguishable. But the consequences of this can be dire.
Particularly as the business gets its footing, it is essential to form a legal business entity—a Limited Liability Company (LLC) or Corporation, for example—that will guard your personal assets from any lawsuit against your business. An LLC is especially well-suited to many small businesses for the relative simplicity of its operations compared to the various corporate entities.
If you plan to pass ownership on to your children or business partners at some point, a business that is organized as an LLC or a corporation is easier to transfer and is more attractive to potential buyers.
Leaving Staff Agreements Unwritten
All business matters are best kept fully documented, but one aspect that entrepreneurs routinely overlook is agreements with staff, whether they be employees or independent contractors. Those agreements accomplish several goals at once: the nature of the relationship is identified and detailed, they know what you expect from them, and they know what they can expect from you.
Failing to Comply
Unfortunately, the multi-tiered nature of American government means the average business owner will be confronted by up to three sources of regulation: federal, state, and municipal governments. Even if you make a good faith effort to comply with one set, violating another can cause big problems, especially when it comes to business licenses.
Operating without a license for your particular type of business risks more than simply losing your good standing in the community—hefty fines and even outright dissolution of your business entity, leaving you personally liable!
Forgetting to Exit Plan
Many entrepreneurs want to see their business carry on after they are gone. Without the proper preparations, your business will die with you, or dissolve upon your retirement. Often, business owners rely on a business transition plan—if you plan to sell your business—or a business succession plan—if you would prefer to pass it on to the next generation.
Having a business attorney who understands the individual needs and unique circumstances of your company is key to helping your business thrive and prosper. If you are interested in learning more about legal protection strategies for your business and how we work with you as a partner in protecting your company, call us today at 612-206-3701 or reach out via our online contact form to schedule a small business consultation session.
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