We all saw it. A few seconds left on the clock. The Seahawks were within a yard of winning the Superbowl. Luckily, they have one of the best running backs in the the league in Marshawn Lynch. Or, so we all thought. Coach Pete Carroll instead made the decision to pass the ball. It was intercepted and the rest is Superbowl history.
While it is easy to criticize Pete, the real question is how many costly bad calls are you making in your own small business? You started your company out of passion. You nurtured and grew it out of love. It means the world to you - much more than the Superbowl. Yet you may be subject to the same bad play calling that could limit your profits, stunt your growth, or cause the loss of your business and personal assets!
So, here are some costly mistakes to avoid at all cost:
- Porous Veil. Many entrepreneurs form a business entity, such as a limited liability company or corporation, to add a sense of prestige and professionalism to their business. However, the most important feature of these entities is the ability to protect your personal assets from business liabilities. If someone is injured because of your business efforts or there is a dispute over a contract or debt, your personal assets could be seized to pay the obligation. This may include your money, cars, personal belongings, or your home! A business entity can protect your assets - but only if managed correctly!!!!! Failure to meet the legal requirements of managing your business could cause the court to ignore it all together and place your personal belongings at risk. Forming your business on an internet site or one-size-fits-all form and walking away may be a very bad call!
- Single Business Enterprise. Some entrepreneurs have more than one company. They are smart enough to place them in different entities. One LLC may handle taxes. Another LLC may sell products. Great so far. the problem comes in when they fail to maintain the right degree of separation. Similar to above, a dispute may cause the assets of one company to be seized to pay the obligations of the other because the court will consider them one company owned by you! Managing multiple businesses without the property formalities? Bad call Pete! Bad call!!
- Weak Contracts. The terms are in writing and they signed it. Got a contract, right? Maybe not!! Just because its in writing doesn't make it a contract!!! Louisiana law has certain requirements of a contract. Additionally, different types of agreements require different formalities. Some must be written. Some must be notarized. The elements change if the contract is a lease, a sale, or a donation, etc. Thinking you have a contract because you wrote something and signed it may be a horrible, horrible call!!! This one is such a big deal, I give tips on my website, DassauColeman.com.
- Promises and Guarantees. If you are in business, the law imposes certain guarantees on you - AUTOMATICALLY. You need to know what they are because, in some cases, you can contract out of them. In other cases, the law protects you from certain guarantees. However, if you present your product or services in certain ways and under certain conditions, you may waive your legal protections and become obligated for much more than you otherwise would have been. Depending on the circumstances, your business actions could cause you to be sued under contract law as well as for negligence! Talking without knowing your legal rights may be the worst call of all!!
- Ignoring Money. The Tax Code can be a friend of a business or its biggest enemy. Of course, tax mistakes can be costly. But, did you know that incorporating the tax code in your business decisions can actually make you more money??? People, LLCs, corporations, and partnerships are all taxed differently. If you understand them, you may be able to pocket more of the money you are currently shipping off to Uncle Sam. Imagine increasing your profits without having to sell or do more. I changed my mind. Failure to use the Tax Code is the absolute worst call of all. Shame on you Pete!
There is a sixth mistake. It's admitted lief serving, so I did not include it in the list. The mistake is thinking you can't afford legal advice to avoid the mistakes above. In many cases, you can get FREE consultation that can help you decide whether you need more help. Don't let a few dollars cost you your whole business.
I hope you find this helpful. You have worked too hard to get here. Don't blow it at the one yard line!