Starting a new business is always exciting; however, it is easy to get caught up in the excitement and fail to properly execute an action plan. There might be issues that you do not think are too important in the beginning, but can potentially mean the difference between future success and failure. With some simple planning now, you can help avoid future legal and financial headaches for yourself. Below are a couple of common mistakes to avoid when starting a new business:

Failing to choose the right business structure for your needs. We recently dedicated an entire post explaining common business structures. Such business structures include the corporation, the limited liability company, a partnership, or a sole proprietorship. Whether you are operating by yourself or with partners, it is important to understand the risk of liability for everyone involved with any business structure you might choose. Your friend might be encouraging you to start an LLC because it seems like the popular route, but you need to make sure that it makes sense for you and your business. Each business structure comes with its pros and cons. Take the time to understand the commitment that must be made for each type.

Failing to have a partnership agreement in writing. Even if you decide to form a general partnership with a friend or family member, a handshake is never enough. It is always best to have something in writing. You might both be excited and getting along just fine in the beginning, but one never knows what can happen in the future. The types of questions we ask our new business clients are: “What should happen if one partner wants to sell their interest?” and “What happens if one of the partners dies?”. These questions should be answered now rather than be overcomplicated in the future.

Failing to execute a proper business or marketing plan. It is important to understand the market for your product or the type of service you’re selling. And even if you are not trying to entice investors for your company, you should have a business plan prepared. This plan can serve as a checkpoint for you throughout the year: refer back to your plan to see where you have been meeting your financial goals and where you have not. These plans help you to set realistic financial goals by identifying what marketing challenges you may face for your business in your area. Preparing a business plan will force you to think about your business’ future in a more objective manner. You will be able to better project how much money you need now to get things going, and the income you can expect to, or hope to, make.

When it comes to starting a new business, it is always better to be proactive. Start being proactive by scheduling an initial complimentary consultation with our office today at (818) 956-9200.

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Glendale, CA 91207

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Sherman Oaks, CA 91403