Entrepreneur magazine recently posted an article on their blog describing five overlooked legal mistakes that entrepreneurs often make. It’s a good worthwhile read. The mistakes mentioned are:
- Making handshake deals (i.e. not in writing) with clients and vendors.
- Choosing the wrong business structure (i.e. sole proprietorship, LLC, Corporation).
- Entering into a partnership without a detailed written agreement.
- Entering into a 50-50 partnership.
- Filing a trademark without doing a detailed and extensive search before hand.
I wholeheartedly agree with four out of the five common mistakes. Perhaps the one I may partially disagree with is mistake number 4: entering into a 50-50 partnership. 50-50 partnerships can certainly present challenges when it comes to governing a company and general decision-making when there is a deadlock between the partners. However, I think categorically ruling out such an arrangement is a mistake. Rather, if the partners desire to establish a 50-50 partnership and that relationship is important to them, they should plan ahead and consider adding detailed provisions in their partnership agreement which deals with deadlocks. In addition, the company buy-sell provisions will have to be carefully considered as well.
Article Referenced: Five Overlooked Legal Mistakes Entrepreneurs Make
© 2011 Alexander J. Davie — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.