Failure to create the proper legal structure from the start – it’s one of the biggest legal mistakes you can make before your company even gets off the ground. While there are many reasons why this type of mistake is made, a small business lawyer will quickly tell you that ensuring you develop the ideal business structure for your specific needs at the outset is an absolute must and will save money in the long run.
The Potential for Damage
The business entity you choose will determine a number of things for your company. It can affect the level of outside investment you can bring in. In some cases, poor decision making may mean your business isn’t attractive to investors. And, should you wish to grow your company in the near future, achieving that can be more difficult with the wrong business entity form.
The wrong choice could also lead to personal legal trouble. For example, when considering the various business entities available, if you decide to move forward with a sole proprietorship when you should have chosen to incorporate, you remain open to personal liability claims. This could be a nightmare scenario if you have assets to protect, as you could quickly find that everything you’ve spent your life building is gone with a single legal judgment.
Tax concerns are another reason for choosing the right business structure when setting up a business entities. Taking a bit more time and obtaining the advice of a small business attorney as you get started may mean not only paying less in taxes, but some of the time and money spent on fulfilling administrative requirements can be significantly reduced as well.
As you budget the start-up expenses for your business, make certain you plan for expert advice on business entity formation. A small investment now could ensure legal protection and cost savings down the road.