Seven Common Mistakes of Business Owners

Following are seven mistakes that we commonly encounter with business owners.  We find that many problems can be avoided if business owners are proactive and consider these guidelines before problems arise.

1.  FAILING TO DO BUSINESS WITH A PROPERLY STRUCTURED LEGAL ENTITY.

Sole proprietorship is a disaster waiting to happen. It subjects all of the business owner’s personal wealth to claims and debts associated with the business. General partnerships are even worse. Having a general partnership subjects one partner’s personal assets to claims and debts that might arise from the acts of the other partner! A corporation, limited liability company (LLC) or other properly structured legal entity is a must.

2. HAVING A PROPERLY STRUCTURED LEGAL ENTITY, BUT FAILING TO DO BUSINESS IN THE PROPER MANNER.

Having a legal entity does little good if you don’t respect it. You must conduct the business at arm’s length and scrupulously keep personal assets and affairs separate from business assets and affairs. There are formalities that you must adhere to if you expect the courts to respect your legal entity. Don’t give a potential plaintiff a way to pierce the corporate veil.

3. NOT KEEPING UP ON PAYROLL TAXES.

This may be the single worst sin of a business owner. The penalties and interest associated with failing to remit payroll and trust fund taxes are significant. These tax liabilities cannot be discharged in bankruptcy and become the personal liability of the responsible business officer.

4. NOT PLANNING FOR OBVIOUS EVENTS.

Death is a certainty and disability is always a possibility. Any business owner must have a plan in place to ensure the continued success of the business when he or she is unable to continue working. A business continuity and succession plan is a must.

5. GIVING EMPLOYEES THE KEY TO THE COURTHOUSE.

Litigation can be financially disastrous, even if you win. It can cost tens of thousands of dollars to successfully defend even the most frivolous of lawsuits. Consider having an alternative dispute resolution agreement in place with all of your employees that will avoid court proceedings and resolve disputes in binding arbitration.

6. HAVING A BAD EMPLOYEE HANDBOOK.

A bad employee handbook is much, much worse than no employee handbook. The terms of a poorly written handbook can be interpreted by a court to be a “contract” with the employees that will require you to do things you never intended to do (doing away with at-will employment rules, etc.)

 7. NOT HAVING CONFIDENTIALITY / NON-COMPETE / NON-DISCLOSURE and TRADE SECRET AGREEMENTS.

There’s no reason to be in business if you aren’t going to protect yourself from employees becoming your competitors (after you’ve shown them the ropes!). Similarly, there are many instances in the conduct of business where you might unintentionally provide what would otherwise be protected information without an agreement that the recipient cannot use it in competition with you. Protect the information and intelligence that makes your business valuable!

This article was originally written and posted by John Kenney on another one of our websites a few years ago.  The information is still very relevant and, because we’re in the slow process of taking down the other web site, we thought it a good idea to bring this one over to this site.

Business Law

Businesses face difficult challenges in an area of law that is constantly changing.  Whatever the issue, from incorporation to taxation, collection to personnel problems, allow Luce Lineberry & Kenney PS to provide the assistance you need.

Starting a Business

When starting a business, one of your first decisions is the type of business entity you should have such as a partnership, corporation, Limited Liability Company (LLC), or other entity.  This decision impacts a number of areas including taxes, ownership structure, estate planning, and numerous other factors.  To get started right, you need to know what the options are and get advice and answers from a dependable and experienced source.

At Luce Lineberry & Kenney PS, our attorneys can work with you to choose the best path to success for your business.

Needs of an Established Business

After your business is established, we can help you with all the complex legal issues that occur in today’s business environment.  Whether reviewing contracts, tax issues, employee agreements, or any other legal issue that affects your business, you can rely on the experience and advice of the attorneys at Luce Lineberry & Kenney PS.

Our approach to the needs of your business is comprehensive – many times a legal issue overlaps several areas of law.  Estate Planning, Family Law, Real Estate, Personal Injury – these are just a few areas which could impact the business and/or its owners.  Our firm includes attorneys in a variety of practice areas – their expertise and support are available to businesses when they need .

Business practice areas where our attorneys can help you include:

  • Bankruptcy
  • Benefit plans including fringe and retirement plans
  • Buy/Sell Agreements
  • Compensation agreements for executive and key employees
  • Contracts including reviewing, negotiating and preparation
  • Employment agreements and policies
  • Intellectual property protection and licensing
  • Leasing of office and commercial space
  • Limited Liability Companies
    • for businesses
    • for real estate investments
    • for IRA retirement accounts
  • Litigation representation
  • Mergers, acquisitions, dissolutions and liquidations
  • Reorganizations
  • Succession planning for owners
  • Tax considerations and compliance
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