This article will outline some of the important ways to avoid common legal mistakes that can adversely affect companies.
Choose the Proper Legal Entity
Operating your business as a proprietorship or general partnership without the liability protection that another form of entity provides can expose you to unnecessary personal liability.
Keep Proper Corporate Records
Improper record keeping can cause problems with the IRS, hamper your ability to raise equity capital and could result in personal liability by “piercing the corporate veil” of the company.
Successful owners safeguard their equity by choosing co-owners carefully. If a co-owner doesn’t work out, changing the arrangement can lead to substantial legal fees and costs at a time when the business can’t easily afford it.
Protect Intellectual Property
Intellectual property (patents, trademarks, confidential information, know-how) is often vital to success and building value of the company. To protect yourself, obtain appropriate approvals and licenses.
Properly Negotiate and Document Agreements
Contracts and leases presented by banks, landlords, suppliers generally are written in their favor. These are negotiable! Review all contracts carefully and ensure they meet your business needs.
Approach Personal Guarantees Cautiously
Many contracts may require your guaranty. Your guaranties to banks, landlords, suppliers and others may expose you to a much greater personal liability. Where possible, try to avoid personal guaranties.
Select Competent and Dedicated Advisers
A team of loyal and competent advisers can help you handle all of these issues, save you time and enable you to focus on the areas vital to business success.