If you are starting a business or already have one established, one thing you want to do is limit your risk where you can and try to avoid making unnecessary mistakes. Of course there’s no way to avoid making mistakes in business, and mistakes can be valuable learning tools, but avoiding the easy ones will save you time, money and help protect the brand you’re working so hard to build.
Here are 5 mistakes you can avoid when starting your business, or fix if you’ve already started one before they lead to bigger issues that will take up your time and money.
- Not Forming A Separate Business Entity
Forming a separate business entity is an important way to protect yourself from personal liability and take advantage of potential savings in terms of taxes. You’ll want to look into the different business legal structures, but usually, when forming a separate business entity you’re talking about a limited liability company (LLC) or a corporation. You’re going to need to file some paperwork with the appropriate state agency and then take steps to set up all the necessary corporate formalities: operating agreement of bylaws, employer identification number from the IRS, separate bank account, obtaining any necessary licenses.
- Not protecting your intellectual property
Business owners put a lot of time and energy into building a business, so you’re going to want to make sure you protect all of your assets. Every business, regardless of size, has some sort of intellectual property that’s an important asset. What the specific intellectual property is will depend on your business, it could be a patent, trademark, copyright or trade secrets. As your business grows the intellectual property can, or will, become a more valuable asset, so it will be important that you, as a business owner, have a process in place to spot and protect intellectual property as your business develops it. Most businesses start small, but protecting your intellectual property is important when planning long-term.
- Not Having and Regularly Updating/Reviewing Legal Agreements
Most people are, understandably, in a hurry to get things going when they start a business; they want to pick up clients, hire workers, whatever the case may be and move quickly. In doing so they forget, or ignore, an important aspect of running a business - every single relationship you have should be in writing. Working on a handshake, or verbal agreement, probably isn’t going to be enough when you get into a disagreement with client, employee or vendor. You’re going to want contracts that are crafted specifically for your business. On top of that you’re going to need some sort of contract management process that will cut down on the time it takes to get a contract together, regularly reviews and updates your agreements and works towards increasing your bottom line. Having written agreements in place will save you time and money if something goes wrong, the business legal environment is becoming more and more litigious and you want to avoid getting caught up in a lawsuit where you can.
- Failing To Be Proactive
Don’t make the mistake of waiting until you have an issue or a major dispute to seek legal help. It is going to be significantly more expensive in terms of both time and money. You should be proactive in terms of legal and risk management. Use business legal services to build a strong foundation and put in place processes that you can integrate into operations that will help decrease potential legal issues. Use a lawyer as an advisor and a counselor, not someone you call randomly to draft a contract. Forming a relationship and having a partner who can help you recognize opportunities and avoid problems can be a real asset to your business as it grows and have a measurable impact on your company’s revenue. Focus on running and growing a successful company and let a legal advisor help you navigate and minimize potential issues. Small business legal fees may vary a great deal, but there are more predictable, and transparent, options available, which are built on being proactive.
- Not Having, Or Not Having Adequate, Insurance
Make sure you have the appropriate insurance for the type of business you are operating and that you have enough insurance. You’ll want to work with a reliable and competent insurance broker or agent in order to make sure you’ve got the necessary coverage. Getting this set up properly is an easy way to limit some of your potential business risk. Make sure you understand the coverage you have, why you have it and the basic terms of your policy. Look for an agent that will advise you based on the specifics of your company, not somebody who's just trying to sell you as much coverage as possible.
Have questions about potential legal issues with your business, and how they can be avoided? Contact us for a free legal consultation.