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Common Small Business Mistakes
Not Getting an Experienced Corporate Attorney
Every growing business faces issues that require the services of
an experienced attorney. Issues such as stock-option plans, employee
negotiations, state and federal tax rates and intellectual property
rights all require a corporate lawyer experienced in representing
start-up and emerging companies. And though such attorneys charge
more than generalists do, the money you spend on experience will
save you time, aggravation and money in the long run.
Ignorance of the Law
Just because laws are numerous and complex doesn't mean your business
can ignore them. Learning a little about the following basic areas
of the law can keep you out of legal hot water:
Basic contractual rules
How to protect your ideas and inventions (copyright, patent,
trade secrets)
Major employer-employee laws
Securities laws affecting how you can raise capital for your
business
Governmental regulation of your industry.
Not Keeping Proper Corporate Records
Improper record keeping can cause problems with the IRS, hamper your
ability to raise equity capital and could result in personal liability.
And yet, small businesses are notorious for failing to keep the records
required for incorporation. Failure to document meetings of the Board
of Directors and shareholders, failure to record stock issuances and
failure to document stock transfers are common infractions of the
guidelines that protect the status of corporations.
Not Clearly Documenting Partners' Rights and Responsibilities
Founding shareholders or partners should have an agreement that
answers the following questions:
How much time and effort is each person expected to contribute?
How much capital will each person contribute?
What happens if the business needs more capital?
What happens if one person leaves the business?
What happens if one person dies?
Will the stock or partnership interest be bought back from the estate of the deceased or from the person leaving the business?
Starting the Business as a General Partnership Instead of a Limited
Liability Entity
Under many states' laws, the partners are jointly liable for the debts
and obligations in general partnerships. If the business encounters
a problem, all of your investment in the business - as well as all
of your personal assets - is at risk. There are other legal options
that avoid liability - corporations, LLCs and limited partnerships,
for example.
Getting Involved in Litigation
Litigation fees can be astronomical, and they can quickly drain
management time and resources. Consider alternative means of dispute
resolution, such as mediation or arbitration. Or, if a reasonable
settlement offer is available, think seriously about taking it instead
of spending more time in litigation.
Ignoring Intellectual Property Issues
Even low-technology companies have intellectual property issues
that may be important for the future success of the business. For
example, do you require your employees and consultants to sign Confidentiality
and Invention Assignment Agreements? Have you registered for a trademark
for an important company logo or product? Do you put copyright notices
on your written information? Are your trade secrets adequately protected?
Every growing business faces issues that require the services of an experienced attorney.
Every growing business faces issues that require the services of an experienced attorney. Issues such as stock-option plans, employee negotiations, state and federal tax rates and intellectual property rights all require a corporate lawyer experienced in representing start-up and emerging companies. And though such attorneys charge more than generalists do, the money you spend on experience will save you time, aggravation and money in the long run.
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OPIC Opens Small Business Center
WASHINGTON, D.C. – The Overseas Private Investment Corporation (OPIC) today opened the OPIC Small Business Center, a new resource designed to impro... Read more >
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