Choosing the Wrong Business Structure
Starting a business feels exciting—until the paperwork starts piling up. Suddenly, you’re hit with decisions that could shape everything about your company’s future. One of the most important? Choosing the right structure for your business.
It might seem like a minor detail, but how you structure your business can affect everything from taxes to lawsuits. And once you're locked in, undoing the damage isn’t always easy.
Understanding Different Business Structures
Sole proprietorship, LLC, partnership, corporation—it’s a lot to consider. Each setup brings its own risks and rewards.
If you go with an LLC, you’ll get protection from personal liability. That means your home and savings aren’t on the line for business debts. But you may face higher taxes than you would as a sole proprietor.
A corporation can help you attract investors and outlive its founders—but it also opens the door to double taxation. Meanwhile, a partnership or sole proprietorship might keep things simple, but it leaves your personal assets vulnerable.
The wrong choice can cost you—sometimes for years. That’s why getting the structure right from the start matters more than most people realize.
Legal and Tax Ramifications of Business Structures
Beyond structure labels, there are real legal responsibilities behind each option.
Corporations come with more rules—like holding annual meetings and keeping precise records. They can feel like a full-time job. On the other hand, sole proprietorships and partnerships are easier to manage but offer little legal protection.
Then there’s the tax piece. Pass-through taxation from an LLC or S-corp might save you money—but only if it fits your specific situation. Choose wrong, and you could end up paying more or dealing with penalties.
It’s not about picking the most popular option. It’s about choosing what actually works for your business and your goals.
Ignoring Intellectual Property Protections
As your business grows, so does the value of your ideas. But if you’re not protecting them, someone else could cash in.
Importance of Trademarks, Patents, and Copyrights
A strong brand or original idea can set your business apart. That’s why trademarks, patents, and copyrights matter.
Trademarks lock down your business name or logo. Patents protect your inventions and tech. Copyrights keep others from copying your creative work. Without them, you risk losing what makes your business unique.
Securing protection might sound complex—but it’s often the only way to keep your ideas from getting stolen or duplicated.
Common Pitfalls in Protecting Intellectual Property
One common mistake? Skipping the trademark search. Many business owners file paperwork only to find out someone else already claimed the name. That can lead to lawsuits and forced rebranding.
Another misstep is waiting too long to file a patent or not filing at all. Your invention could be fair game without legal protection.
It doesn’t have to be this way. With the right legal support, your intellectual property can be locked in and protected—before it’s too late.
Neglecting Proper Contract Drafting and Management
Verbal agreements might feel easy at first—but they rarely hold up when something goes wrong.
Crucial Elements of Contracts
Contracts are your safety net. They outline what’s expected and what happens when things don’t go as planned.
Using online templates might save time now, but it often leads to gaps that create major problems later. Your business is unique—your contracts should be too.
Custom agreements make sure everything is clear, enforceable, and built around your business’s actual needs.
Common Contractual Mistakes
Many business owners reuse outdated contracts or assume vague language is “good enough.” It’s not.
When terms aren’t specific—or when contracts go stale—they can be twisted in court or challenged altogether. Keeping your agreements clear and current is one of the smartest things you can do to avoid conflict.
Working with a business-focused legal team means you don’t have to guess. They’ll spot the issues before they become liabilities.
Failing to Comply with Employment Laws
Hiring your first employee can be a big milestone. It also comes with a long list of legal requirements—ones that can’t be ignored.
Understanding Tax and Labor Laws
Wage rules, safety standards, employee classification—these laws are everywhere. And the penalties for getting them wrong are steep.
Misclassifying someone as a contractor or ignoring overtime pay can land your business in court or under investigation. It’s a risk not worth taking.
Setting up sound HR practices and understanding how state and federal rules apply to you can prevent trouble down the road.
Developing an Employee Handbook
An employee handbook might seem like overkill. But without one, you’re leaving your policies up for interpretation.
A good handbook explains your rules, how complaints are handled, and what employees can expect. It’s also one of the best tools you have for protecting yourself from legal disputes.
Updating it regularly and having it reviewed by a legal team ensures it actually covers what it needs to.
Overlooking Regulatory and Licensing Requirements
Before opening your doors—or even your laptop—you need to know what licenses or permits your industry requires.
Industry-Specific Licenses and Permits
Some industries are more regulated than others. If you’re in food service, construction, health, or finance, skipping licensing can lead to shutdowns or fines.
Even if you're not in a highly regulated field, there may still be city, county, or state rules you need to meet.
Doing your homework—or working with a law firm that does it for you—can save you from expensive mistakes.
Ongoing Compliance and Updates
Getting licensed is only step one. Keeping your business compliant means staying on top of changing laws.
That might mean renewing licenses, adjusting your policies, or updating paperwork. Falling behind puts your entire operation at risk.
When you’re running a business, staying ahead of these updates is tough. That’s where consistent legal guidance makes all the difference.
Avoid Costly Business Mistakes—Call Today
Every business decision has legal weight. Choosing the wrong structure, skipping IP protections, or using vague contracts can open the door to serious consequences.
At Hubbard Snitchler & Parzianello, we help Michigan business owners make smarter legal decisions from day one. From forming your business to protecting your ideas and staying compliant, we offer practical, customized legal support for every stage.
Call us today at (313) 546-9685 to speak with our Plymouth-based team and start protecting what you’re working hard to build.