Failure to Prepare and Execute an Owner’s Agreement
The very public squabble among the various parties claiming responsibility for starting Facebook–which even made it to the silver screen–highlights the importance of having an owner’s agreement (shareholder’s agreement, operating agreement, partnership agreement, etc.). To keep the venture peaceful and focused on success, have an attorney draft the appropriate agreements and memorialize the parties’ understanding of the business arrangements.
Failure to Honor Your Non-Compete
If you incorporate your new business while you’re still working somewhere else or right after you’ve just left, you could open yourself up for litigation from your former employer if you signed their employment agreement with non-competition provisions. Further, if you use that company’s resources to develop intellectual property for your new venture while still at that company, the ownership of that IP could be open to question as well.
Failure to Follow Corporate Formalities
One of the major benefits of incorporating is to protect your personal assets from potential business liabilities. If you don’t follow the formalities, especially when it comes to finances, you could lose that protection.
Failure to Pay Payroll Taxes
While it may be tempting for fledgling ventures to skip payroll taxes a time or two, or to cut other corners, it is never worth it. The IRS can come after your personal assets as well as those of other company officers if they find out–and they usually do.
Failure to Research Corporate Entities
Get the advice of a qualified business attorney and accountant about which corporate entity would work best for your business. Each offers different tax structures; you want to choose the one that offers you the most benefits as an entrepreneur.
Source: Bloomgarden Goudreau & Rosen PA August 2014 Newsletter