Small business owners sometimes wear a lot of hats – entrepreneur, business planner, payroll specialist, and manager. When you are running a company, it’s easy to make mistakes. In fact, we are going to look at three specific mistakes many small business owners make.
Choosing the Wrong Business Entity
In the initial stages of planning a business, a budding entrepreneur chooses from one of the following business types:
- Sole proprietorship,
- Partnership,
- C corporation,
- S corporation, or a
- Limited liability company.
These are the basic entity types, though there may be some variations. Each type of business has its advantages and disadvantages. For example, S corporations and limited liability companies avoid the double taxation corporate owners face. Also, it’s easier to set up a sole proprietorship, but a C corporation offers owners limited liability that the sole proprietorship may not have.
Making this choice sets the tone for the rest of the business. An unwise choice can become a big mistake later.
Having Weak Contracts
Even a small business may use a number of contracts every day. From vendors to clients and everything in between, having strong contracts in place is a must.
Companies sometimes land in court because of contract disputes. It’s best to start out with strong, well-written contracts to avoid costly mistakes and litigation.
Failing to Put a Succession Plan in Place
Business owners make decisions and put out fires every day. So, many small business owners made the mistake of ignoring the line on their to-do list that says, “Get a succession plan.”
Succession plans do exactly what the name sounds like – plan for succession. Stop and think about what would happen if you suddenly were no longer there to run the business. Who would take over? Is anyone qualified and knowledgeable enough to take your place? If you have partners, what would happen to the partnership interests of a deceased partner? This, and many other questions, can be answered by a strong business succession plan.
Get Your Business Started Out on the Right Foot.
From the first day, small business owners make decision and some mistakes. Call an experienced Alabama attorney to learn more about the legal aspects of managing and owning your business.
Attorney Bruce Adams helps clients just like you with their legal needs. For a free consultation with an experienced Alabama attorney, contact us at 256-237-3339. Located in Anniston, we serve clients in Calhoun, Etowah, and St. Clair Counties.