4 Common Legal Mistakes Entrepreneurs Make

The life of an entrepreneur is incredibly busy—a lot falls on the plate of a business owner. Some very critical things inadvertently get pushed to the back burner, such as legal issues.

by Amy Toepper

As a business attorney, I see many entrepreneurs let simple legal issues slip through the cracks, causing them more stress as their business continues to grow and prosper. Here are four common legal mistakes entrepreneurs make:

Failing to Act Like a Corporation

Incorporate early has always been my rule of thumb, for it keeps your business away from legal liabilities and can offer substantial tax benefits. Regardless of the type of entity you create (LLC, S-Corp, etc.), once you file the initial paperwork, you need to be prepared to act like the corporation you’ve
become such as creating a separate bank account, not co-mingling assets, and keeping minutes of your board meetings. This establishes a firm foundation on which to build your empire.

Not Creating Contract Agreements

If it’s not in writing, it hasn’t happened. From the smallest
of client agreements to more detailed partnerships, every business should have standard contracts in place. Contracts not only protect your business but also they help you better manage expectations and ensure you will get paid for the work you are doing. Contracts do not have to be complicated—
we have some great options on our Legal In a Box platform. 

Lack of Employment Documentation

Hiring your first employee is a sign that your business is growing, but failing to document the newest member of your team properly may cause headaches down the road.  You should have a core group of documents that employees must sign that may include IRS forms (different for employees and independent contractors), a non-disclosure agreement, and an employee handbook. Note whether or not you are hiring an employee or an independent contractor—there are significant legal differences between the two. Give me a call if you need some help. 

Rushing into Commercial Lease Agreements

Many small business owners think signing a commercial lease agreement is just like signing a rental agreement for an apartment, but it’s not. You should always take the time to have an attorney look over even the most short-term of agreements. There can be lots of fine print that will get you in trouble, particularly if your space needs improvements or construction. 

TAKEAWAY: Taking the time now to get your legal house in order will not
only help you grow a successful business but also give you peace of mind as an entrepreneur. 

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Amy Toepper, Esq. is an attorney with more than 15 years of experience from general practice to business law. Learn more about her practice at amytoepperlaw.com