According to the Small Business Administration (SBA), about twenty percent (20%) of business startups fail in the first year and fifty percent (50%) within five years. Here are 9 Deadly Mistakes Small Business Owners Make:
1. Choosing the Wrong Business Structure:
There are Sole Proprietorships, LLCs, LLPs, Limited Partnerships, General Partnerships, Non-Profits and Corporations. Choosing the right legal structure means understanding the tax implications, ownership options, management, control, personal liability exposure, formalities, access to capital etc.
2. Signing a Contract in your Personal Capacity:
Signing your name as an individual may subject you to personal liability in the event of a breach of contract. Signing as a representative means that you are signing only on behalf of the entity. Example:
[Your Name], President
3. Commingling Personal and Business Finances:
The commingling of assets or funds can allow the Court to disregard your business structure and "pierce the corporate veil" exposing any owners or members to personal liability.
5. Choosing a Name That You Can't Own or Trademark.
CYA & hire a Trademark Attorney to conduct a Clearance Search as early as possible! Is your brand already registered with the USPTO? Is it being used by someone with Common Law rights? Is your brand confusingly similar in sound, spelling, foreign translation or commercial impression to another registered mark? Is it merely descriptive? Don't risk rebranding or a costly Trademark Infringement Lawsuit.
6. Exposing Your Business to Copyright Infringement by:
"Screenshot-ing" a photo and posting it on social media.
Using a photo from Google for your Blog/ Ad/ Website.
Using Music that is copyright protected for your Podcast Intro/Outro
Not understanding that Fair Use is not a right. It is a defense used in Court when you are being named as a party to a Copyright Infringment Lawsuit.
7. Never Obtaining the Licenses and Permits for Your Business (Federal, State, City & County).
If you operate your business without a valid license, at a minimum, you should expect to pay a fine or penalty. Not having the proper business licensure is also considered fraudulent activity and can open your company up to lawsuits and the loss of Common Law Trademark Rights.
8. Not Having Business Insurance:
Money is usually tight for Start Up businesses, and protecting yourself against the possibility of some hypothetical, farfetched event just doesn’t seem like a priority right now. Disasters happen more frequently than you think. Insurance can help you pay the costs of property damage, legal fees, attorneys fees, lawsuit judgements, lost business income, and other covered losses.
9. Using Template/ Generic Contracts:
Using Legal Zoom or a Contract that you've found on Google is extremely risky. These are generic contract templates usually not drafted by an attorney. They may not be valid in your state and will not address unique issues of your business, niche, industry or the transaction itself.