Start ups offer an exciting opportunity to for ambitious entrepreneurs. With the opportunities for growth that these ventures present, however, there are also numerous obstacles that can arise along the way. This article reviews some of the most common mistakes that we see start ups make. Hopefully, by reading about these various challenges, you can take the steps necessary to decrease the chance that you ever encounter them.
Failure to Understand Personal Guarantees
Many start up companies encounter challenges because they fail to appreciate the terms of a personal guarantee. If you fail to properly pay your taxes, there is a strong chance that the Internal Revenue Service will end up holding you personally accountable and seize your personal assets. It is critical to carefully read business credit agreements to determine the exact terms of each arrangement. Our lawyers have substantial experience helping business owners create and navigate these agreements.
Not Understanding Complex Issues with Employment Law
Numerous start up businesses attempt to avoid challenges involved with hiring workers by assigning all workers the title of independent contractor. Over the last few years, the Internal Revenue Service and Department of Justice have articulated that there are a number of complex factors that determine whether a worker is an employee or independent contractor. Employers who fail to understand these matters but who retain a large number of worker are at substantial risk of facing legal consequences. To make sure that your start up is fully compliant with labor laws, it is best to speak with a knowledgeable attorney.
Operating as Sole Proprietors instead of LLCs
Many people find that the process of establishing an LLC in Michigan is fairly simple. The process primarily involves completing an Articles of Organization document and sending a $50 check to the state of Michigan. If start up founders continue to operate as sole proprietors, however, they face a number of substantial risks. Not only do individuals expose their personal assets to business creditors, they also can lose out on the numerous advantages offered by tax savings.
Performing Work Without a Written Ownership Agreement
While establishing an LLC is often inexpensive and simple to do, the presence of numerous individuals with an equity interest in a company creates the need for written agreements. One of the documents that can capture these complex terms is an operating agreements which can address ownership and management concerns. Properly considering the numerous complexities that can arise when a business is created can help to reduce the number of potential complications that can pop up later on.
Speak with a Knowledgeable Business Law Attorney
No matter the exact problem that your start up is facing, we have the knowledge and experience to help. Contact Resnick Law today to speak with an experienced employment lawyer who knows what it takes to navigate the challenges that can arise in getting an innovative new business off the ground.
(image courtesy of Danielle MacInnes)