Many entrepreneurs are great "big picture" people but are not detail oriented. They often are great sales people, service oriented, but hate details such as accounting, writing down procedures, and redundant tasks. However, all businesses have a set of rules to follow - this is known as the law!
Make sure your legal entity is legal. If you have a partner and don't have an operations agreement you will have an issue. - This issue almost always destroys all the goodwill as partners fight for "their share" of the business. A partnership is a marriage without the intimacy. You will share space, assets, money, liability and are in for better or worse! If your "partner" dies you may find yourself with an inadvertent partner - their spouse! Buyouts, partners leaving, death, incapacity, personal financial issues will affect your business. If you can't write these agreements seek professional help from an attorney.
Mistake 2 --- I Don't have that Documentation!
If you do not have the contract, the customers release, the picture of the accident, it doesn't count in the court room. Although we can enforce oral contracts it is extremely difficult to establish terms. You are in business and your records are there to "CYA" (a legal term). If you don't have the customers signature and we do need to litigate it will cost a lot more money to try to prove it by "extrinsic" evidence. Keep good records and put ALL deals into writing.
Next a written contract does not mean the other party will perform any more than the "gentleman's agreement." It just gives us a way of making the other party perform or to show that they were in the wrong!
Mistake 3 --- "They Can't Do That"
Yes they can! In business there are no business police. What does this mean...They can steal your patent, compete with you, solicit your clients, and purposely say false things about you! Amazingly no police offer will do anything about it! Why? Because all business laws are enforced through attorneys and judges, not the police. You cannot just call the police and say they stole my patent - make them stop producing that product.
So what can we do. First of all if you don't trust the person or they have a reputation that you don't like do not do business with them. A contract will not fix a bad person. If the person has nothing to lose - you have nothing to gain by suing them. If you issue credit to the wrong people you will lose and have no recourse. If you are in doubt many attorneys can pull various public records to perform a due diligence study. When in doubt be curious and check it out! Google them at minimum.
Mistake - 4 --- I would of...but it had to be done immediately!
One of the biggest disappointments to my client is when I have to tell them they were the victim of fraud and they have little recourse. Sometime they may get their pound of flesh if the person went to far and is charged criminally, but, they seldom ever see their money back.
If there is not time to talk to an attorney, write the contract, or do a background check - The answer is NO! I have been in business many years and there are not many business emergencies. If it looks to be too good it is not! Never, never do the paper work later... It will never happen.
Mistake 5 --- I figured I would Hire an Attorney Later if I really needed one!
I see at least one client every week who has waited too long. I will give a few examples: If a man with a gun serves you official looking papers and it says you must respond-You must respond! If you wait until the foreclosure begins - you most likely will lose your house! If you ignore it - it will not go away. It does not get cheaper to ignore a summons, court date or official paper. The ostrich approach of sticking your head into the sand doesn't even work well for it. Ignoring legal problem often triples the costs.
When you decide to write your own response and don't know the rules - you are playing a game of chess with a master and don't even know the basics - you will lose every time. This is not to scare you into an attorney's waiting arms, but to inform you that certain things like stating your defense to the complaint must be in your first response or you lose that defense. If all else fails buy a book and educate yourself.