Whether you are just starting a new business or have been running a business for years, there are four common legal mistakes that both novice and seasoned entrepreneurs make that can have a significant impact on the future viability of your company:
Co-mingling of business and personal finances. You may have started your business as a hobby and watched it grow into a full-scale business that now comprises a majority of your personal assets. If you have not taken the necessary legal steps to protect your assets, you need to consider forming a legal entity like a limited liability company (LLC) or corporation to provide the proper asset protection. Many small business owners select an LLC to gain valuable personal liability protection without the complexities of a corporation. Choosing an LLC also makes it easier to pass ownership on to future generations or other partners. In addition, LLCs are taxed as pass-through entities, which means business profits are not taxed separately but flow through to the owner.
Lack of employment agreements. Employers need to have written employment agreements with their employees to help them govern the relationship. Employment agreements should specify job duties and responsibilities and set expectations for performance.
Lack of proper business licenses. It is not uncommon for business owners to overlook obtaining the proper local, state or federal licenses required to operate their businesses, but failure to do so can cause your company to lose its good standing and cost you in terms of fines and having your company administratively “dissolved,” which can result in the loss of personal liability protection if you operate a corporation or LLC.
Lack of business succession planning. If you don’t want your business to die when you do, or dissolve once you retire, then you need to put the proper plan in place to see that your business goes on without you. This may take the form of a buy-sell agreement, a business transition plan or a business succession plan, depending on if you want to sell your business or pass it on.
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 to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.
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