Learn how to avoid these ten common and costly legal mistakes when starting your small business. The single smartest thing to remember as a small business owner is to know that you don’t know. Every entrepreneur dreams of launching his or her dream company without any hitches — and legal mistakes can become sticky!
Founders of ExpertBusinessAdvice.com, Scott L. Girard, Jr., Michael F. O’Keefe, and Marc A. Price, have been there…
Collectively, they have started 17 businesses and have begun a new book series as well: “The Crash Course for Entrepreneurs.” Their newest addition to the series is THE CRASH COURSE FOR ENTREPRENEURS: BUSINESS LAW BASICS, with additional co-author, Mark R. Moon Esq.
The Ten Common Legal Mistakes and How to Avoid Them:
1) Not being self-disciplined. Self-discipline is essential. Don’t blur lines between budgets and bonuses and employer/employee roles. This is one of the very common legal mistakes.
2) Not using contracts, or not reading them if they are used. If you cook your own books to make the business look profitable, you are only cheating yourself. You must avoid this legal mistake.
3) Not consulting with a lawyer for key issues or important business document review. If you’re going to invest your life, time, and money in a business, don’t you think it’s worth starting out the right way and ensuring paperwork experts get a chance to look at it?
4) Not incorporating, or choosing the wrong corporate structure. Your attorney can guide you based on your vision and plans: sole proprietorship, incorporation, limited liability: ask your attorney. Choosing the wrong form is one of the most common legal mistakes.
5) Failing to patent, trademark, or copyright material is another of the common legal mistakes. Do you really want to build an entire business around something, only to find out the hard way that you’re not the first to do it, and the person who was first did protect themselves and their idea with a patent, trademark or copyright? Learn about these forms to avoid legal mistakes.
6) Not having a formal agreement between owners. Even if you’re best friends or college roommates, put in writing who the owners are, how much each owns, what the responsibilities are, what happen if one dies or elects to leave, how major business decisions will be handled, etc. Split ownership 51/49 instead of 50/50 so when decisions must be made, that can always be enacted. Learn the common legal mistakes to sail smoothly to success.
7) Starting a business with a large loan, but not understanding the terms of the loan or how to manage it. Just because you got a hefty business loan doesn’t mean you can start throwing money around. It takes careful analysis to determine how many employees a business requires to run optimally. Don’t over extend.
8) Working on your new business idea at your old job. Meet with an experienced business lawyer and check out your individual situation. It would be better to figure out how to develop prototypes of your new company’s product under conditions that guarantee the new products are yours, not theirs.
9) Thinking you know enough. Just because you made it through the first year does not mean you can kick back and rest on your accomplishments. Another of the common legal mistakes.
10) Not keeping records and documents in perfect order. Do yourself a favor and make your paperwork a model of organized efficiency.
Each of the books in the Crash Course for Entrepreneurs series offers a high-level overview of the critical things you need to know and do if you want to survive and thrive in this super-competitive world. You will learn how to avoid common legal mistakes. Aimed to be digested in 2 hours, there’s much more to learn about each topic than the books can cover, but what you read will give you the framework for learning the rest. The authors’ website, www.ExpertBusinessAdvice.com offers expanded support for entrepreneurs and is updated daily.