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5 Common but Deadly Small Business Legal Mistakes

August 19, 2019 By Kelley Keller

5 Common but Deadly Small Business Legal Mistakes

Thousands of small businesses open in the United States each year, but the number that survive and thrive for decades are in the minority. Many of these small businesses fail because small business owners make deadly legal mistakes, particularly in the early days—before and after they open their doors to customers.

Don’t be among the many small business failure stories. Avoid the five common but deadly small business legal mistakes described below, and your chances of success will rise significantly.

1. You Mixed Your Personal and Business Finances

Perhaps the most common and biggest legal mistake that a small business owner can make is mixing personal and business finances. The first step to doing this effectively is choosing the right business structure to reach your goals (e.g., sole proprietorship, partnership, limited liability company, or corporation).

Once you’ve formally formed and registered your business, you need to:
• Open a business bank account.
• Get a business credit card.
• Obtain an electronic identification number from the IRS.
• Create an accounting system and payroll system.
• Develop recordkeeping processes that ensure all of your personal and business transactions are separated from each other.

If you don’t keep your personal and business finances separate, problems will ensue. For example, you could miss tax deductions or make errors that could get you into a lot of trouble if the IRS ever audits you or your business.

2. You Never Obtained the Licenses and Permits Required for Your Business

Depending on the type of business you operate, the industry it’s in, what you sell, and where your business is located, the licenses and permits you’ll need will vary. If you don’t have the required federal, state, and local licenses, you could end up paying fines.

In some instances, failure to obtain a license could end badly with your business being shut down. Do your homework and get the licenses and permits you need to legally operate.

3. You Don’t Use Legal Documents and Agreements Drafted by the Right Attorney

There is a long list of contracts and agreements that you should use to protect you and your business. From employment agreements and non-disclosure agreements to customer invoices and vendor contracts, you’re exposing yourself, your business, and possibly your family to a significant amount of unnecessary risk if the documents and agreements you’re using weren’t drafted by (or at the very least, reviewed by) an attorney with experience in creating each specific type of document and agreement that you use.

4. You Never Created a Business Plan or Financial Strategy

How will your business survive over the next year? What about the next three years or the next five years? How will you make money? How will you grow your business? If you don’t have a business plan and financial strategy in place, then you’re throwing darts at a dartboard while wearing a blindfold. You might get lucky, but it’s far more likely that you’ll fail.

With that in mind, take the time to draft a comprehensive business plan and develop a financial strategy that supports the business plan. Get your financial projections in order and ensure you’ll have the cash flow your business will need. Otherwise, you’ll end up closing your doors.

5. You Didn’t Protect Your Valuable Intellectual Property

Every business has intellectual property and all intellectual property has the potential to become extremely valuable. However, the value could be lost if you don’t protect your intellectual property with trademarks, copyrights, patents, and trade secret protection programs.

Don’t be fooled by cheap trademark and copyright protection services or legal document services providers. The protection that these one-size-fits-all options typically provide is not adequate. By using a cheap provider, you save money today, but you you could end up spending thousands, hundreds of thousands, or millions of dollars more in the future when problems arise. Only an experienced intellectual property attorney can effectively help you protect your intellectual property to the fullest extent possible.

About Kelley Keller

Kelley Keller, Esq. is an intellectual property (IP) attorney, speaker, and educator with two decades of experience in the IP field. She works with individuals and businesses in a wide variety of industries helping them transform their ideas, knowledge, and innovation into valuable business assets that drive profits. Kelley offers education to established businesses, startups, entrepreneurs, corporate executives, non-profits, government agencies, legal professionals, and students about starting and growing a business as well as about IP, social media law, and the importance of protecting valuable brand assets and creative work.

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What People are Saying about Kelley Keller

Lisa Frederiksen | Author, Speaker, Trainer, Consultant at BreakingTheCycles.com

Kelley works differently. After an initial phone conversation (I live in CA and she's in PA), she drafted a scope of work for both efforts and set a flat fee which included (and still includes) the back and forth conversations a client needs in order to get the best results. She is extremely knowledgeable and truly able to "hear" what I'm after and create meaningful legal documents and advice that have helped me immeasurably. I highly recommend Kelley Keller.
2016-04-23T10:27:42-05:00
Kelley works differently. After an initial phone conversation (I live in CA and she's in PA), she drafted a scope of work for both efforts and set a flat fee which included (and still includes) the back and forth conversations a client needs in order to get the best results. She is extremely knowledgeable and truly able to "hear" what I'm after and create meaningful legal documents and advice that have helped me immeasurably. I highly recommend Kelley Keller.
http://kelleykeller.com/testimonials/lisa-frederiksen/

Kelly Phillips Erb | Senior Editor at Forbes

Kelley was able to explain complicated legal issues in a manner that was easy to understand without being patronizing. She was also great at talking me down from ledges - it was easy to get worked up when opposing parties weren't being cooperative but Kelley advised me to trust in the process and she was right.

Kelley explained my costs and options, as well as the pros and cons of each. She also kept me informed about my matter, letting me know what I needed to do at the appropriate time. All in all, I felt very involved in the process without being overwhelmed. Kelley made a wildly stressful situation so much better. I would highly recommend her services.
2016-04-23T10:42:43-05:00
Kelley was able to explain complicated legal issues in a manner that was easy to understand without being patronizing. She was also great at talking me down from ledges - it was easy to get worked up when opposing parties weren't being cooperative but Kelley advised me to trust in the process and she was right. Kelley explained my costs and options, as well as the pros and cons of each. She also kept me informed about my matter, letting me know what I needed to do at the appropriate time. All in all, I felt very involved in the process without being overwhelmed. Kelley made a wildly stressful situation so much better. I would highly recommend her services.
http://kelleykeller.com/testimonials/kelly-phillips-erb-senior-editor-forbes/

Charlotte Avery | CEO at Being Charlotte Avery

Words cannot express how much I appreciate Kelley Keller. She has helped me and my business on so many levels. Whenever I have a question I always know that I can call her and she will give me the best advice/counsel. I know that my business is in good hands with Kelley.

Kelley, THANK YOU for EVERYTHING!!!
2016-04-23T10:46:03-05:00
Words cannot express how much I appreciate Kelley Keller. She has helped me and my business on so many levels. Whenever I have a question I always know that I can call her and she will give me the best advice/counsel. I know that my business is in good hands with Kelley. Kelley, THANK YOU for EVERYTHING!!!
http://kelleykeller.com/testimonials/charlotte-avery-ceo-charlotte-avery/

Ruth Koup | Founder of Suits to Careers, Inc., Dress for Success South Central PA & Tied to Success

Kelley Clements Keller, Esq has been a huge support to the launch of our new umbrella organization, Suits to Careers, Inc. and the branding and trademarking of our men's program, Tied to Success. We could not have navigated this transition without her support. Many thanks.
2016-04-23T10:49:27-05:00
Kelley Clements Keller, Esq has been a huge support to the launch of our new umbrella organization, Suits to Careers, Inc. and the branding and trademarking of our men's program, Tied to Success. We could not have navigated this transition without her support. Many thanks.
http://kelleykeller.com/testimonials/ruth-koup/

Matt Bloom | Founder & CEO of CRIMEWATCH Technologies, Inc.

Kelley is an exceptional IP attorney. She understands the legal nuances facing start-ups and is willing to work within those restrictions. Kelley is casual and easy to work with, but when it comes to legal action she is aggressive and takes charge. She has successfully helped us secure coexistence agreements and trademarks for our business. Here expertise has added exponential value to the technology we have built and I would highly recommend her to anyone seeking IP representation.
2016-04-23T10:53:29-05:00
Kelley is an exceptional IP attorney. She understands the legal nuances facing start-ups and is willing to work within those restrictions. Kelley is casual and easy to work with, but when it comes to legal action she is aggressive and takes charge. She has successfully helped us secure coexistence agreements and trademarks for our business. Here expertise has added exponential value to the technology we have built and I would highly recommend her to anyone seeking IP representation.
http://kelleykeller.com/testimonials/matt-bloom-founder-ceo-crimewatch-technologies-inc/

Zachary Ziegler | Brewmaster at Molly Pitcher Brewing Company

Kelley is not only extremely knowledgeable in the realm of intellectual property, but she made the whole process fun! It's not often you hear fun and legal work in the same sentence but Kelley's personality eased my worries while keeping me upbeat the whole time. She explained the entire process in language I could understand and kept me updated continuously. I would not hesitate to work with her again or refer her to my friends and family.
2016-04-23T10:54:48-05:00
Kelley is not only extremely knowledgeable in the realm of intellectual property, but she made the whole process fun! It's not often you hear fun and legal work in the same sentence but Kelley's personality eased my worries while keeping me upbeat the whole time. She explained the entire process in language I could understand and kept me updated continuously. I would not hesitate to work with her again or refer her to my friends and family.
http://kelleykeller.com/testimonials/zachary-ziegler-brewmaster-molly-pitcher-brewing-company/
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