- Not reading the fine print. Setting up your company as a corporation or a limited liability company means you won't be held responsible for your business' unpaid debts, right? Not necessarily. If you sign documents that use the term "personal guarantee" you will be held personally responsible for any company debts. Obviously, this kind of wording is often hidden in the document, and is commonly found on bank loans, equipment leasing, tenant agreements, and business credit card applications. Try to negotiate limited guarantees that will serve as a partial personal protection. Seek qualified legal help if you are unsure.
- Make yourself a contract, for yourself! As your business grows you may take on partners, shareholders, or a board of directors. Be sure you have a solid contract in place to avoid the possibility of being ousted by a board of directors.
- Get insurance. Even if you are operating your business out of your home you should invest in additional insurance for your business. A basic general liability plan costs only about $500 and provides a general base of coverage for small businesses.
- Don't dip into your retirement. While it is your own personal decision whether or not you invest your retirement funds into your business, keep this in mind: if you ever have to file for personal bankruptcy, retirement funds are usually protected. When creditors are after every penny, having cash they can't touch is a major plus.
- Keep an eye on your books. Sad to say, even in small, tight-knit businesses, theft occurs. Employees may be deterred from stealing by the simple fact that they know you are keeping an eye on them. Make sure hours reported on are actually worked, payments on bills are accurate, and that there are no made up vendors on your payment list.
It is easy to be excited about your business, and always be looking for ways to do things better. While keeping a positive attitude is key for your success, it is also important that you look for ways things could go wrong. By watching out for such problems you reduce the risk of seeing your business fail because of one little mistake.