You’ve come up with a brilliant business concept and you are in a hurry to get it going. That is the biggest mistake you could make, as that leads to many other “mistakes” that could cost you success. Business planning takes time, and ensuring that it is done correctly takes a little money – but better to spend that money now than to lose everything later.
The Mistake of Choosing the Wrong Business Entity
One of the biggest mistakes an entrepreneur could make is to choose the wrong business entity or to not incorporate soon enough. If you don’t incorporate soon enough, there may be a partner that was involved in starting the company who drops out. Then, when the company is ready for financing or is getting ready to go public, that partner shows up again to demand his or her equity. When you set up a business entity, whether it’s a partnership, corporation, limited liability corporation or other entity, it’s more difficult for someone to come in at the last minute to try to claim equity.
Each entity has it pros and cons. A business attorney will explain the differences and will help you choose the best entity for your company. A corporation provides the most protection against creditors and others. Each entity also has different tax consequences that must be taken into consideration. The future of your venture, including plans to go public, is also a determining factor for which entity is best to use.
The Mistake of Choosing the Wrong Attorney
When starting a business venture, you should always retain an attorney. However, you should be very selective in who you choose. Hiring an attorney with no experience is the same as not hiring an attorney. An inexperienced attorney may not recognize subtle traps that an experienced attorney may see. Additionally, some venture capitalists rate your judgment by how much experience your attorney has.
Hiring friends or relatives who offer steep discounts is not the best way to go, especially if the friend or relative does not have the necessary experience. In addition to not having the needed experience, you could run into a conflict of interest sooner or later. And, if you are not happy with your attorney’s advice and decide to fire him or her, now you’ve created hard feelings in the family or ruined a friendship.
Your attorney should have experience in the several areas of law, including but not limited to securities law, corporation law, contract law, commercial law, employment law, real estate tax law, franchise law, tax law and intellectual property law.
If you find an attorney with experience in most of these fields, he or she may farm out, with your permission, areas that he or she is not familiar with. For example, your chosen attorney may have experience in employment law, corporations, tax laws and intellectual property laws, but may lack in real estate law. It is fine for that attorney to bring in someone else who has that experience. France Law Firm has extensive experience in business formation and income tax planning.
The Mistake of Not Having the Correct Documents
This document protects your trade secrets should a partner, board member, employee or other person involved with your company decide to leave. Your attorney will help you with terms such as barring the person from working for a competitor for a set number of months or years, taking trade secrets with him or her when that person leaves, or several other contingencies.
Terms and Conditions
Terms and conditions generally dictate how your website may be used. It may include several paragraphs about disputes, warranties, representations, refunds, intellectual property rights and more. It may also spell out what would get a person banned from using your website, if that is applicable to your business.
Contact France Law Firm
If you are ready to open a new business, contact France Law Firm to set up a consultation to discuss your new venture and to determine the best path for you to follow.