The following is an outline of a lecture I have given to the Edson Institute
at Arizona State University in Tempe, Arizona as well as the Arizona Small Business Development Center
and tte students of my business law class at ASU in Glendale, Arizona.
I am hoping this summary report will be sufficient to trigger action on the issues discussed and to cause the reader to obtain some professional advice regarding same.
I hasten to add that the problem of intelligent, self‐reliant business owners working beyond their skill set is a common problem and one that can cause life‐altering harm to the do‐it‐yourselfer.
(Take‐home motto: “Don’t operate on yourself and don’t do your own legal work.”)
1. Not Using the Corporate or Limited Liability Designation
“Use it or lose it.” Virtually every day I see clients who form a corporation or LLC but who fail to add the designation “Inc,” or “Corporation,” to their name. This might save you money on business cards, letterhead and marketing materials, but when you get named personally in a lawsuit because the plaintiff did not know (or claims to not know) that you are doing business as an entity, you will get religion. Exaggerating to make a point: You can walk away from a failed corporation but you can’t walk away from yourself. Personal liability is one of the worst things that can happen to anyone and it is easily avoided. So, form an entity and use it in and on everything you provide to your clients and vendors.
(Newco, Inc., WE, Corporation, Newco, LLC, Professions, PLLC)
2. Not Putting Your Assets into the Entity
After you form the entity and use the name, e.g. “Newco, Inc.” or “Newco, LLC,” you must be sure to put all assets that you intend to belong to the business into the business. Think of the corporation or limited liability company as a bowl. Without assets the entity is just a shell; hence, the name “shell company.” If you buy furniture, fixtures or equipment, or sign leases, or hire employees, etc. you want to do so in the name of the company. (You may have to sign a personal guarantee for credit, but for asset protection, business and tax purposes, the assets need to be in the entity. Continue reading “10 Common Mistakes that Business Owners Make”