Mistakes Many Small Businesses Make
I’m always on the lookout for good business articles. I came across this one titled “Business Law Mistakes: 10 Ways to Avoid Them” from a firm in Texas. I borrowed the bullet points and applied my theory to each one.
The reason I liked this article is that it is straight to the point, and the advice is applicable for many businesses I deal with:
1. Form a Local Entity – Unless you plan on doing millions of dollars of business and have offices throughout the United States, you are better off just starting a Massachusetts entity.
2. Get Your Documents in Order – No matter the entity you choose, you must have corporate governance documents in place.
3. Prepare a Shareholder Agreement – Shareholders should have an agreement to dictate how the corporation will be run.
4. Understand all the Terms – This is key, don’t sign something if you don’t understand it.
5. Contracts and Other Documents Must Be Tailored to Your Business – This saves time and money eventually if you incorporate critical points of your business into all contracts.
6. Create an Entity for Each Business – This does not apply all the time. It depends on the business, but never a bad idea if you don’t mind spending the extra time and money.
7. Change in the Name or Address of the Company – always update the Secretary of State with any change.
8. Alternative Voting Rights or Unequal Ownership Interests – If there are equal voting rights, at the very least, make sure there is a deadlock clause.
9. Sign all Business Documents – This is a no-brainer.
10. Effective Means of Collection – Sometimes, you have that client that doesn’t want to pay. There should be protocols in place on how to get that money.
This isn’t an exhaustive list but gives any business owner the basics. If you have questions or need assistance with the above, please contact me, and I’ll be happy to assist.