Entrepreneur Magazine has a good article on Five Overlooked Legal Mistakes Entrepreneurs Make. Those mistakes include:
- Making handshake deals with clients and vendors;
- Choosing the wrong business structure;
- Bring on partners without a detailed agreement;
- Establishing a 50/50 partnership;
- Filing a trademark without doing enough homework.
In my practice I’ve seen the mistakes outlined above cause significant problems for entrepreneurs. Getting agreements in writing is one of the easiest things you can do to avoid legal mistakes, whether it’s with clients and vendors or partners.
I find it refreshing that the lawyer quoted in the business structure section prefers setting up corporations most of the time for her clients. LLCs are formed roughly at a 2 to 1 rate compared to corporations in Iowa and I’m sure nationally that trend follows as well. In many cases, a corporation may be preferable to the LLC. It all depends on the circumstances. All too often people are quick to form a business entity without much thought or investigation. My experience, however, it’s best to speak with a business lawyer and accountant prior to forming your business structure to see what best meets your needs.
The trademark issue is also a great one to point out. My experience is that most entrepreneurs fail to check whether their trademark is available with the U.S. Trademark office. This often results in problems if the business name or trademark infringes on another mark. If an entrepreneur has invested significant dollars in marketing and branding, that mistake can be very costly. So it is helpful advice to speak with a business attorney and/or trademark attorney to determine the availability of obtaining a trademark for your business name.