1.                  FAILING TO DO BUSINESS UNDER A CORPORATE FORM.  Sole proprietorship is a disaster waiting to happen.  It subjects all of the business owner’s personal assets to claims and debts associated with the business.  General partnerships are even worse.  Having a general partnership subjects one partner’s personal assets to claims and debts that might arise from the acts of the other partner!  A corporation, limited liability company (LLC) or other corporate form is a must.

2.                  HAVING A CORPORATE ENTITY, BUT FAILING TO DO BUSINESS IN THE CORPORATE FORM.  Having a corporate entity does little good if you don’t respect it.  You must conduct the business at arm’s length and scrupulously keep personal assets and affairs separate from business assets and affairs.  Don’t give a potential plaintiff a way to pierce the corporate veil.

3.                  NOT KEEPING UP ON PAYROLL TAXES.  This may be the single deadliest sin of business.  The penalties and interest associated with failing to remit payroll and trust fund taxes are significant.  These tax liabilities cannot be discharged in bankruptcy and become the personal liability of the responsible business officer.

4.                  NOT PLANNING FOR OBVIOUS EVENTS.  Death is a certainty and disability is always a possibility.  Any business owner must have a plan in place to ensure the continued success of the business when he or she is unable to continue working.  A business continuity and succession plan is a must.

5.                  GIVING EMPLOYEES THE KEY TO THE COURTHOUSE.  Litigation can be financially disastrous, even if you win.  It can cost many thousands of dollars to successfully defend even the most frivolous of lawsuits.  Consider having an alternative dispute resolution agreement in place with all of your employees that will avoid court proceedings and resolve disputes in binding arbitration.

6.                  HAVING A BAD EMPLOYEE HANDBOOK.  A bad employee handbook is much, much worse than no employee handbook.  The terms of a poorly written handbook can be interpreted by a court to be a “contract” with the employees that will require you to do things you never intended to do (such as progressive discipline, doing away with at-will employment rules, etc.).

7.                  NOT HAVING CONFIDENTIALITY / NON-COMPETE / NON-DISCLOSURE and TRADE SECRET AGREEMENTS.  There’s no reason to be in business if you aren’t going to protect yourself from employees becoming your competitors (after you’ve shown them the ropes!).  Similarly, there are many instances in the conduct of business where you might unintentionally provide what would otherwise be protected information without an agreement that the recipient cannot use it in competition with you.  Protect the information and intelligence that makes your business valuable!