There are countless reasons that could cause a company to fail. It’s impossible to know them all or to be prepared for every instance. But the majority of “big” mistakes that result in a company failing are not only predictable, but common. If businesses can be aware of the common causes behind failing businesses they can do a lot to prevent themselves from falling into the same pit.
Common “Big” Mistakes Businesses Make:
- Mistake #1: Failure to discuss selecting or changing the form of a business entity with an attorney.
- Mistake #2: Failure to generate an appropriate document outlining the relationship between owners in writing.
- Mistake #3: Failure to generate and/or regularly maintain an effective business plan that includes an accurate description of the business.
- Mistake #4: Failure to memorialize agreements with key executives; particularly when operations depend upon their involvement.
- Mistake #5: Failure to put appropriate and necessary employment manuals and policies in place that characterize and document employment relationships with every employee.
- Mistake #6: For corporations, failure to hold regular Board of Directors’ meetings and annual Shareholder meetings.
- Mistake #7: Failure to maintain books and records in a proper and organized manner.
- Mistake #8: For corporations, failure to properly issue shares for legal consideration and the failure to accurately identify valid exemptions from security registration requirements.
- Mistake #9: Failure to dissolve the business when the company is no longer in business.
- Mistake #10: Failure to establish what constitutes as a working relationship with an experienced business attorney.
In order to avoid an unnecessarily high risk of litigation work with an experienced business lawyer to draft/review agreements, generate appropriate documentation of contracts, maintain corporate formalities, etc. Get in touch with the southern California business lawyers at The Law Office of Law Office of Ernesto F. Aldover today. We encourage our clients to address legal issues quickly and efficiently to avoid additional legal problems. It’s the best way to avoid costly litigation.