As a business owner, you often wear many hats around your business that can be rewarding and thrilling. But for many, understanding the correct procedures can be a challenge. Don’t fall for these common mistakes that can have consequential effects on your small business as it grows.
- Wrong business structure. Your business structure impacts how you raise capital and file taxes. Registering your business as a corporation, LLC, or sole proprietorship, all have different legal implications.
It’s important to file your business under a structure that works best now and, in the future, and to follow the correct standard operating procedures for that structure. Best practice is to consult with an experienced legal counsel to avoid any hurdles.
- Inaccurate bookkeeping. Bookkeeping for small businesses is essential because it records and organizes all financial transactions coming in and out of your business. Inaccurate bookkeeping can lead to issues with the IRS, especially when your business is registered as an LLC or corporation.
Not following proper bookkeeping procedures for your business can raise legal questions about the validity of your business, making you liable for any of the business’s debts.
3. Lack of written contracts. Any agreement, whether it be with a contractor, a vendor, or even a customer, should be clearly written and documented. A contract minimizes misunderstanding and decreases your chance of any disputes. Contracts should be fair but written in your business’s favor, and offer protection should deliverables go unmet.
4. Ignoring intellectual property laws. For many small businesses, ownership of intellectual property might not be high on the priority list of expenses. Branding matters, and when it’s so closely tied to your business—legal pursuit against stolen intellectual property could close your business entirely. To prevent infringement on your brand, you should protect and monitor identifiers of your brand such as your business name, logo, and slogan.
In the early stages of your business or before any rebranding efforts, register trademarks, copyrights, and patents.
5. No written succession plan. A succession plan is a written document that lays out what is going to happen to your business when you retire or pass away. It includes plans for buy-sell agreements and appointed individuals who will step in the meantime.
To avoid someone inappropriate challenging ownership of your business, it’s important to plan accordingly. This helps maximize your assets for any potential buyer and guarantees your business continues running like you intended.