A few weekends ago I was invited to join friends at the Octoberfest in Central Park. While waiting in line I overheard a man (who had probably already had a few beers) loudly explaining to his buddy why he shouldn’t set up a corporation for his new company. “You’ll have to pay double tax, and you only need it if you are going into a risky type of business,” he said.
Talk about bad advice! I thought about saying something, but in the end, I opted to bite my tongue and keep my mouth shut. The guy had no idea what he was talking about. But as they say: You get what you pay for.
I understand the last thing most people want to spend money on when they start a business is highly paid professionals. So instead of consulting with an attorney or CPA about the complexities of starting a business, they forge ahead.
Nowadays, instead of hiring professionals, new business owners often turn to online do-it-yourself legal options. Many of these resources are satisfactory, but they shouldn’t replace professional legal advice. I recommend that if you want to do the work yourself, that’s okay. Just invest in an attorney or CPA, who can review all your documents before you finalize them.
With so much information at your fingertips, it’s easy to get a false sense of security and assume that filling out all the necessary paperwork on your own is no big deal. But keep in mind that not everything is as black and white and you may think.
The language used on many of these documents seems straightforward, but it’s not that simple. Because I’m a lawyer myself, I sometimes joke that the forms were written by attorneys in such a way as to ensure job security. Of course, that’s not true. But seriously, there are nuances involved with making legal decisions about your company, and unless you have professional training, you can’t possibly grasp them. An attorney is trained to identify issues and give you informed advice.
If you wait to hire an attorney until you’re facing a legal issue, then it’s generally too late. And talk about racking up expenses — just watch the billable hours churn away. The fees you’ll pay for legal services in advance of a problem are insignificant compared to what you’ll pay an attorney to get you out of trouble. Plus, when you run into legal trouble with your business, it can cause more than a drain on your cash. It’s a productivity drain, and it affects you mentally and emotionally.
The bottom line: Don’t be penny wise and dollar foolish when you’re building a business. Get the professional advice you need to grow your venture in a smart way. Early mistakes can be costly, but even worse, may cause your business to fail.
What’s the best business advice you’ve ever received? Share your thoughts in the comments below.