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3 Common Mistakes When Starting A Business

Monday, May 13th, 2024

Hi, my name is Tom Knapp. I’m an attorney in the corporate group at Brown and Fortunato. And today, what I’d like to talk about are three common mistakes that I see when entrepreneurs start a business or existing companies form a new business line.

The first mistake that I commonly see is picking the incorrect structure type.

Now, there’s lots to consider when picking a structure type, and depending on what industry you’re in, you could be subject to a requirement of a professional limited liability company or a professional corporation.

You should also look at tax structure as well. I’d recommend reaching out to your CPA for this, but I’ve seen a lot of businesses pick the wrong tax structure and it’s cost them real dollars down the line.

The second would be contracts and arrangements.

The first contract that people should look at is the contract between the owners of the business. You want to make sure that whatever you have in place, everyone understands what happens in the event of tragedy and what everyone’s rights and obligations are.

My philosophy is good fences build good neighbors. And if you have an unclear company agreement or no company agreement at all, which we’ve seen, it can lead to some heartache down the line.

The second would be third-party contracts. With these, it’s really important to make sure that an attorney has prepared and fully described the contents of the agreement so that you understand what’s in them.

We have seen clients pull contracts off the Internet and not really understand what’s in the contract or how it functions. And, you know, they’re stuck in a in a bad contract for a long time.

And then the third is regulatory compliance and licensure.

This is particularly important in the healthcare space. We want to make sure that all payment arrangements are proper. We want to make sure that all licenses are in place. Really, whatever industry you’re in, you should have a handle on what the requirements are and what the regulations are, and it’s easier to plan and fix things on the front end than have to fix a mistake on the back end.

If you need any help navigating these issues or others, please reach out to your regulatory or corporate attorney at Brown & Fortunato.