When you are starting your new business, you may not think you need a lawyer. However, you might want to reconsider. Lawyers know a lot of useful information, such as what type of entity you should have and what rules and regulations you need to comply with. Often, people who choose not to consult with a lawyer make mistakes. Take a look at the following legal mistakes for entrepreneurs to avoid.
Choosing the Type of Entity
You can choose how you structure your business, and one of the most important reasons is to avoid being held personally liable if something goes wrong. You can choose a limited liability company (LLC), a partnership, or a corporation, and you should choose wisely. Each type of entity is different, so you need to consider carefully which is best for your industry and your setup. Each is taxed differently and has different levels of protection and liabilities for each partner. Make sure that you understand those differences and choose the best one for your business.
Another mistake that some entrepreneurs make is related to finances. It is very important that you separate your personal finances from your business. If you don’t keep your finances separate, you could lose the protections your entity gives you. If you are just starting out and don’t have bank accounts open yet, you can designate one credit card for business expenses. As soon as you get your Tax ID number, you should open a business banking account. Make sure that you separate your business expenses from your personal expenses so that there is never any confusion down the road.
Don’t Download Internet Contracts
Contracts are critical in business. It is important to understand that there are different types of contracts, and they usually contain clauses that benefit one party. You need to read over the contract carefully so that you know what you are agreeing to. You also need to take time to review a contract before you sign it. You should never gloss over it and sign because you always have room to bargain. If you don’t understand the legal jargon in the contract, you should be sure to ask someone who can explain it to you. You will want to understand the terms of the contract as well as any consequences to breaching it.