Fatal mistakes to avoid when starting your new business…advice from a Grand Junction Business Attorney.

1. Choose the right business structure –Small business owners often start out as a sole proprietorship. This structure is easy to start up, has very little paperwork and costs very little to begin; however, in a sole proprietorship, there is no separation between an individual business owners’ asset and the assets of the company. This means that if the company were to get sued, all your personal belongings would be at risk. If your business is just a “side business” and will not be your primary source of income, a sole proprietorship may be the right solution; however, if you are looking to grow a viable, self-sustaining business, you might consider one of the other four business structures available, including: Partnerships, LLC, Corporation or S. Corporation. Each structure has a slightly different tax structure and different implications regarding liability and income. It is important that you choose wisely the business structure that will benefit your business the most and consult with a business attorney or consultant prior to registering your business with the state of Colorado.

2. Create clear employment contracts –Regardless of whether you supervise two employees or 200 employees, providing expectations in writing is always a good idea. Employee handbooks and written job expectations will help to protect your business from the unwanted expenses caused by employee termination, breach of confidentiality or change of work conditions. Employers should be detailed in these contracts, providing information regarding what the job requirements are and what actions may be taken if job requirements are not met. A basic employee contract should include information such as:

3. How long will a terminated employee receive pay?

4. What constitutes termination without pay?

5. What is the reasonable notice expected for termination of the employee/employer relationship?

6. Formal description of the working conditions

7. Pay and benefits

8. General description of duties to be performed

9. Non-compete agreement (if applicable)

10. Who owns the employees work?

11. Confidentiality agreement (if applicable)

12. A method for resolving any employment disputes

Creating a well-planned employment agreement will help to prevent courts from imposing legal obligations you would not have agreed to. Without the presence of a written contract the courts will decide employee disputes based on what is considered a verbal contract or on the evidence of the relationship. The outcome of this is often in the employees favor and can cost a small business thousands of dollars in unexpected liability.

3. Have your paperwork in order –Register your business name and trademarks with the state of Colorado. Make sure you are properly filing for permits, licensing, zoning compliance, copyrights, trademarks and patents. Review your lease agreement and make sure there are provisions that benefit you if the lease is terminated by the building owner. Protect your intellectual property by following through with legal processes. These seemingly small details are the least exciting part of becoming a new business owner but are the most important pieces to have in place before launching a new product or service.

4. Plan for your taxes and maximize deductions and benefits –Make it a point to know the ins and outs of your business expenses. Taxes are not only affected by the structure of your business, but by all the related business operations. Startup costs, research & development, marketing, office expenses, insurance, employee expenses, software subscriptions, travel and professional fees can usually be deducted. Utilize these tax benefits and plan ahead from the inception. The steps you take before the end of the tax year can help to save thousands of dollars immediately. Tracking your expenses effectively will help to gain valuable insight into your company’s cash flow and maximize the dollars you save. Consider setting aside quarterly estimated tax payments to prevent an unexpected surprise at the end of the year and help to lower your tax liability.