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Five Common Legal Pitfalls Small Business Owners Should Avoid

African American news - Abegaz on Small Business Do's and Don'tsFor a small business owner, the decision to start a small business can seem as momentous as their wedding day or the birth of their first child (maybe a little less significant if you've had the good fortune of not having turbulence that a small business experiences). More often than not, the path of a small business owner is not paved with great forethought about ways to protect themselves and their business. Here are the five most common legal pitfalls that small business owners should avoid.

1. Not choosing the right business structure – most small business owners fail to take advantage of using a legal entity (for example LLC, S-Corporation, etc.) for legal protection and to take advantage of tax benefits. In fact, most small business owners run their business as a sole proprietorship and expose themselves and their business to unnecessary legal liability.

2. Failure to document – with the many hats a small business owner wears, following all of the formalities for organizing their legal entity and maintaining their required annual entity filings gets shoved on the back burner.

3. Weak or non-existent written agreements – often, a small business owner will fail to document agreements with employees, clients, and/or vendors because they believe a handshake is sufficient. It is not. Verbal agreements rarely hold-up in court.

4. Not having a business succession plan – what happens to your business and your loved ones if you become disabled or pass away unexpectedly? Having a business succession plan helps you anticipate these potentially unexpected life events.

5. Failing to get legal advice when appropriate – the average small business owner does not have the legal background to make sure their legal affairs are in order. Just like a small business owner should have a tax specialist handling its tax issues, a small business owner also needs to have a trusted legal advisor to handle the legal affairs of the business. As the old saying goes..."pay now or pay more later."

[Banch T. Abegaze is a Los Angeles attorney and principal at the Abegaze Law Group, with offices in Santa Monica and Woodland Hills. Her practice is focused on Estate Planning, Probate, and Small Business Legal Services. Mrs. Abegaze can be reached at 866-606-4208 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . You may obtain further information regarding the services offered by the Abegaze Law Group at www.abegazelawgroup.com.]


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