My name is Noah Green. I’m an attorney. I specialize in representing small and mid-sized business owners. And over the more than 20 years that I’ve done this, I tend to see the same mistakes over and over again. And there’s four in particular that I see almost every day that I want to talk about right now. The first common mistake that I see is a failure to follow corporate formalities, business owners who have paid money to form a corporation or LLC in an effort to shield their business can do things to undermine that shield that they think they’ve paid for.
They do that by commingling their personal and business money together, their business income and business expenses with their personal income and their personal expenses. They can also do it by not following corporate formalities, not updating their minutes and their stock certificates and all the other documents in that corporate binder that they’ve paid for and received and then stuck in a drawer and never looked at again once they’ve bought it.
The second most common mistake I see is the divulging or sharing of their customer list. The customer list is just what it sounds like. A list of all the people that have come to your business and hired you in the past. In the course of doing business with those folks who tend to learn their names, what they like, what they want to pay.
Things that make them special and different. And you can use that to your advantage. And that is the core of your business. And if you lose that business, you lose the most likely source of your income in the future. That typically happens when people, business owners, delegate the responsibility for managing a file or managing a customer to an employee, to a partner to someone.
And that customer tends to start seeing that employee or other person is the connection. That’s the relationship they want to maintain and build. And they forget the owner and they move on. And when that person, that employee or other person no longer works for you, the customer who they’ve forged a relationship with tends to go with them.
And that can really harm a business. The third common mistake I see with business owners is misclassification of their employees. Sometimes business owners want to label their employees and treat them as independent contractors. That way they don’t have to pay them overtime or lunch breaks or rest breaks or all the other things that an employee is required to receive under law.
They think if they just label them an employee or have them sign a piece of paper that says they’re an independent contractor, they can bypass those requirements, but they can’t. The law, especially in the state of California, deems anyone who works within the core of your business to be an employee and expects you to pay them and treat them as such.
The last most common mistake I see is delay or ignoring problems. Business owners who are served with legal documents or confronted by an angry employee or customer sometimes can just hope that goes away by ignoring the problem. They never do. These problems fester and grow bigger over time, and it’s the only way to solve them is by beating them head on.
Spend the time it takes to deal with them before it gets worse and out of control. Those are the four biggest mistakes that I see my clients make, and I hope that those out there watching the video can learn from that and avoid those mistakes themselves.