Common Mistakes to Avoid When Starting a Small Business

  • Posted on: Jul 31 2022
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Starting a small business can be an exciting, yet terrifying, experience. You are responsible for finding everything from a location for the business, to funding it, to establishing the proper suppliers, and more. But among all of this excitement, the last thing you want to do is make a legal mistake that can greatly disrupt your success. Here are common mistakes to avoid when starting a small business. 

1. You choose the wrong business structure.

When setting up your business, there are a variety of legal structures from which you can choose. These have an impact on how your business will pay its taxes and what assets your creditors can seize and how. Structures include:

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Limited Liability Company

It’s important to note that you are still able to change the structure of the business over time. For instance, just because you start your business yourself as a sole proprietorship doesn’t mean that you won’t eventually add employees or other owners and change your structure to a corporation, LLC, or partnership.

2. You fail to obtain tax identification numbers for the business.

With the exception of sole proprietorship, your business will need an Employer Identification Number (EIN), which you can apply for through the IRS. The EIN serves to identify your business when paying taxes, similar to how Social Security numbers do for individual people. If your business must collect sales taxes and remit them to the state, you would need a certificate and/or a sales tax number from the state(s) in which you operate.

3.  You operate the business without the proper licensing.

While your business may require you to obtain a state license to legally operate, certain types of businesses require you to obtain a permit from the federal government. This is almost certainly true if your business sells firearms, alcohol, or tobacco. If you are unsure as to which licenses you need, it’s best to consult with a professional who has knowledge of this topic, such as an attorney.

4. You fail to protect your intellectual property. 

Some of the most valuable assets of any business are its intellectual property. If you fail to protect your “IP” it can be stolen from you and there will be nothing you can do to protect it. Intellectual property that your business may own includes:

  • Business/trade name
  • Logo
  • Service marks
  • Domain name
  • Domain design
  • Product designs
  • Commercial trade secrets
  • Confidential information
  • Inventions

By filing to protect your IP through copyright, trademark, and patent protection, you can help protect your IP and therefore prevent its loss. A qualified business attorney will know how to help you properly file for protection. 

5.  You don’t hire a lawyer because you don’t want to spend the money.

The four abovementioned mistakes can all be avoided by hiring an experienced business law attorney early on in the process of starting your business – even before making any money. The good news is that it generally costs less to hire an attorney at the onset of your business, before the formation process, than it would be to hire someone to handle an issue after it arises. 

The Law Offices of Brian L. Fox, APLC Help those Who Are Starting a Small Business

When you are starting a small business, there are so many things to consider – and remember. You may have no idea what you should be doing. That’s why it is helpful to consult with a knowledgeable and experienced Virginia Business Attorney. At the Law Offices of Brian L. Fox, APLC, we know how important it is to safely establish and protect the business for which you are working so hard. We will help to walk you through the process. To learn more or to schedule a free consultation, contact us today!

Posted in: Business Planning