The 8 most expensive legal mistakes entrepreneurs make:
Entrepreneurs are always looking for ways to cut costs and maximize value. They may think of legal services as an unnecessary expense and try to get away with using DIY forms on the internet rather than seeking the advice and expertise of a qualified attorney. This strategy could prove to be very expensive down the road and even put you at risk of going out of business. Here are some of the most expensive legal mistakes entrepreneurs make, and what you can do to avoid them.
Documented agreements are a must for every small business owner. Although handshakes and oral agreements are binding in many cases, the problem with these unwritten agreements is that it can be nearly impossible later to determine what the actual agreement was. Two well-meaning people can disagree on what was decided and trying to figure it out can be expensive.
These questions should be answered and documented properly in a comprehensive estate plan. Every business owner should at a minimum have a will or trust, financial power of attorney, health care proxy, and succession plan to ensure smooth transition in the event of your incapacity or death. Do not attempt to draft these documents yourself; it is likely they will not be drafted, or executed, properly, and these errors will end up costing you a lot more in the long run.
There is a lot to learn about documenting agreements correctly, buying the right insurance, and understanding which tax rules you should be following when running a business. If you don’t want to invest the time in learning everything yourself , team up with a business attorney who will work with you to proactively to nip costly mistakes in the bud – especially the mistakes you don’t even know you are making.
Finally, find a lawyer you love! I recommend working with an attorney who is business-savvy and understands the entrepreneurial spirit. A lawyer who has their own business is ideal, as who better to help guide you than someone who is facing the exact same challenges? And although it may seem like finding a needle in a haystack, it’s worth it. Why? Because nothing you learn in a law book can compare to what you learn in the trenches.
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