It doesn’t matter if you’ve been running a company for a long time or are have just started your new business journey, there are some common mistakes that both veterans and rookies make that can negatively impact your enterprise:
- Failure to protect personal assets. Many business owners start out small, typically setting up their companies as a sole proprietorship. However, once the company has found a firm footing, it’s time to protect the personal assets you are accruing as your business grows. That means transitioning your business structure to a corporation or limited liability company (LLC). Many people choose the LLC structure because it provides the same asset protection as a corporation, but a corporate structure is more complex to maintain. Another advantage to the LLC structure is that passing ownership on to other partners or heirs is easier than with a corporation. In addition, the tax structure of an LLC is simpler than a corporation. LLCs are taxed as pass-through entities, which means that profits are reported on an owner’s individual federal tax return instead of being taxed separately.
- Not executing employment agreements. To properly govern your relationship with employees, you need employment agreements. These agreements should detail job responsibilities and performance objectives.
- Not having necessary licenses. Overlooking the proper local, state or federal licenses that may be required to operate your company is a common mistake business owners make. Failing to obtain the right licenses can be costly — not only in terms of monetary fines, but also in the loss of your company’s good standing, which can lead to a loss of personal liability protection if you operate an LLC or corporation.
- Failure to do succession planning. You need to put the proper succession plan in place unless you want your company to die when you do or dissolve when you retire. Succession planning entails more than just choosing the right people to run the business after you’re gone; it also involves creating a buy-sell agreement or other legal documents that will govern how your business ownership shares will either be passed on or sold.
Johnson Legal PC specializes in business and corporate law and can assist your organization in achieving its full potential. Contact us to learn more about how a great corporate attorney can help your business thrive.