Some hopeful entrepreneurs start their businesses without considering the potential legal issues that could arise.
Before you launch your new enterprise, be aware of common mistakes that company founders face.
1. Not setting clear terms with other founders
Businesses often begin as ventures with friends or family members. What seems simple at the beginning can become more complex as time goes on and the company starts generating revenue. Regardless of your relationship with other co-founders, you should have a founder agreement made up to address important issues such as division of equity, stake in ownership and roles and responsibilities of each founder.
2. Choosing the wrong type of entity
Whether you have partners or plan to launch your enterprise alone, numerous business entities exist with varying levels of personal liability protection and tax incentives. Ensure you understand the types of business structures you could choose from, such as a limited liability company, limited partnership or corporation, before legally instituting your organization.
3. Failing to understand tax implications
Some entrepreneurs are creative types who feel excited to finally become their own bosses and see their dreams realized. Whether you are a numbers person or not, you must take the time to learn about all of the taxes your company is responsible for paying. Failure to do so could result in hefty fines and penalties.
Starting a business is an exciting adventure. However, you must do your homework and prepare yourself legally for all of the potential problems that running a company can entail.