The Law Office of Lynnette Ariathurai A Professional Corporation

Common - and Critical - Errors That Can Sink A Business

Eager to follow their dream and make a profit off a great idea or their passion, many business owners make critical mistakes during the formation period. Some mistakes cause problems that can be corrected later - but far too many cause problems that can stunt or sink a business. It is critical that you have skilled legal guidance on your side as you establish a business to avoid common pitfalls and errors.

Here are a few of the most common small business formation mistakes:

Assuming they need an LLC - Most people have heard of an LLC and therefore automatically assume that it is the entity type they need legally protect their business. There are a broad range of types of business entities, however, and each accomplishes something unique. Sometimes an LLC is not the correct fit for a business and creating an LLC could leave the business - and its owners - exposed to risk. It could also severely inhibit growth of the company later down the road.

Assuming template forms and contracts are good enough - Many people simply download boiler-plate agreements and contracts online and then fill in the blanks. In a lot of cases, business owners do not even read these agreements and have no idea what kind of exposure they leave the business open to. Work with an attorney to create contracts and agreements that protect your company and meet its growth needs.

Assuming they can have an "understanding" with partners and shareholders - Many people go into business with friends, family and colleagues with whom they already have a great relationship. They neglect to write agreements to formalize the business relationship, including obligations, percentage ownership and entitlements. You can count on disputes arising at some point in the life of the business. If those disputes are severe enough, your lack of an agreement could cost you or your partner an entire ownership share of the company and all the hard work and resources that have been invested.

Assuming no one will steal their idea - The greatest asset a small business has is its idea. Whether that is the concept to sell purple popsicles from a food truck to the next great innovation in technology, someone will try to duplicate what you are doing. It is critical that you work with an intellectual property attorney to develop safeguards, patents, licenses and trademarks that will protect your idea and the ability of your company to extract return from that idea.

The Law Office of Lynnette Ariathurai partners with business owners and entreprenuers to build a solid legal foundation that will facilitate growth, both in the early stages and throughout the life of the company. Investing the time into doing it right up front will pay in dividends later.

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The Law Office of Lynnette Ariathurai, A Professional Corporation
39300 Civic Center Dr., Suite 110
Fremont, CA 94538

Phone: 510-794-9290
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