Common Mistakes Business Owners Make Can Lead to Legal Ramifications
Oct. 8, 2020
Business ownership has numerous perks. You get to “be your own boss” and manage the business exactly the way you want. However, becoming a business owner also involves substantial risk. Studies show that about 20 percent of small businesses fail within a year. Many of the common mistakes business owners make can have substantial legal consequences. The best way to lessen the chances of your business failing is to avoid these crucial errors. In addition, an experienced business attorney can help you with the legal aspect of owning your own company.
Business Mistakes You Should Avoid
As the old adage goes, “Failing to plan is planning to fail.” If you are interested in starting your own business or buying an existing business, educating yourself about the legal steps involved in business ownership is crucial. Some of the most common mistakes new business owners make are also some of the most consequential.
Using the Wrong Legal Structure: Selecting the correct business entity for your particular business goals is crucial. Many new business owners choose to structure their business as an LLC because it is the easiest business entity to begin. However, LLCs also have considerable limitations. Make sure to evaluate the pros and cons of different business entities with your lawyer so that you can choose the entity that is right for you.
Relying on Insufficient Contracts: Some business owners are too idealistic when it comes to agreements with potential investors, vendors, or other parties. Remember, a handshake agreement is not legally binding and cannot be enforced in the event of a dispute. Relying on one-size-fits-all online contracts can also lead to avoidable problems. Generic contracts will not take state or local laws into consideration and may not address concerns unique to your industry.
Not Getting the Necessary Permits and Licenses: The paperwork necessary for starting a new business can sometimes be overwhelming, which leads many business owners to make major oversights when it comes to licenses and permits.
Using an Inadequate Employment Agreement: Hiring employees brings on a host of legal risks – especially if you do not protect yourself with a well-crafted employee agreement. Your agreement should include the terms of the employment duration, rights and restrictions upon termination, your company’s policies, and more. An employee handbook is also a vital tool you cannot afford to forget.
Misclassifying Workers: Properly classifying workers as employees and independent contractors is crucial. Misclassifying workers can lead to considerable penalties. You may even be responsible for years of wage repayment.
Contact a Stamford, CT Business Law Attorney
A new business owner can fall into countless legal pitfalls if he or she is not careful. The best way to avoid serious legal mistakes when starting a business, choosing a business entity, and drafting contracts is to work with an experienced business law attorney. Call The Law Offices of Peter V. Lathouris, LLC today to schedule a free case review with one of our skilled Fairfield County business lawyers.