Avoiding 4 Common Small Business Startup Mistakes
Woman sitting with head in her handA small business owner will have legal questions or concerns at some point. From deciding on the type of business entity to form, to contract reviews and negotiations, to worker classifications and employment regulations, there are dozens of times that small business owners need the assistance of a qualified small business attorney. Here are four of the most common mistakes small business owners make:
1) Selecting the wrong type of business entity.
There are a number of options to choose from when forming your new small business, from sole proprietorships to LLCs to corporations, and the type of entity you select will have far-reaching ramifications. Tax treatments, sale of interest in the business, and personal liability are among the most common impacts based on your business type. Sole proprietorships can leave your personal assets - your home, cars, savings, and more - at risk if your business is sued or cannot repay a debt. Partnerships can leave you responsible for liability from the actions of a partner. LLCs and corporations protect your personal assets and limit your liability, but there are tax considerations to consider, as well. For these reasons, it's important to seek the advice of a qualified professional business consultant or small business attorney before making these decisions.
2) Incorrectly classifying workers
It is a business owner's responsibility to correctly classify workers with the IRS, and to know how the IRS's definition of what makes one worker an independent contractor and another an employee... and what that means for your responsibilities for each worker. The primary reason for worker classifications is for the determination of taxes and record-keeping. In general, if you control when, where, and how work is done, your worker is an employee and not an independent contractor. Failure to report an employee - or incorrectly report an employee as an independent contractor - can have serious fines and penalties, so if you have questions about whether a worker is an employee, it's best to ask an attorney with experience in employment law.
3) Discovering a problem with a contract you already signed
This is a challenging situation for anyone to find themselves in, and can lead to major problems for a small business, including potential income loss or a business relationship souring. Contracts should accurately describe duration, cost, responsibilities, and other details in a way that each item is clearly defined. Having a contract attorney look over contracts before you sign them is the easiest way to minimize risk.
4) Failing to protect intellectual property
If a competitor started using your business name or selling products identical to those you've developed, what options would you have? Artists are protected by copyright laws, and, in much the same way, your business can be protected by registering trademarks and patents. These laws were put in place to protect inventors, innovators, and businesses from copycats and those who seek to profit off your hard work. A trademark and patent attorney can help small businesses protect their inventions and products by assembling patent and trademark applications and making sure all the legal boxes are checked.
Many of these legal challenges can be avoided by consulting with small business specialists and attorneys, but many times, it just isn't in the budget to pay hourly fees for these services, especially if you're a startup. But what if there was a low-cost solution so your small business can have access to qualified attorneys? As a member of our legal subscription services, you have access to experienced, dedicated, professional law firms with expertise in small business legal matters to answer your questions and give advice throughout your small business journey. You can get contracts reviewed, ask legal questions, and even have attorneys send out debt collection letters or make phone calls on your behalf.