Starting a new business can be exciting. While it’s easy to get hyper-focused on the vision of serving customers as soon as possible, it’s important not to let this excitement distract from planning the business properly.
The way a business structures itself as a legal entity, handles trademarks, contracts, employment issues, and real estate transactions will have an impact on everything from day-to-day operations to paying taxes and the owner’s personal exposure to legal risks. Making these kinds of decisions can be overwhelming, confusing, and even a bit scary, but it’s a necessary part of launching any successful business.
On a recent episode of Influencers Radio with Jack Mize, Business Attorney and Strategic Business Growth Expert DeAnn Chase discussed some of the biggest misconceptions and mistakes around legally structuring a business for success.
DeAnn Chase is the founder of Chase Law Group, where she helps entrepreneurs and business owners to create proper legal structures that form the foundation for a successful business. She has practiced law for over 25 years and has appeared in virtually every courthouse in Southern California, defending businesses of all sizes against lawsuits.
During the interview, Chase shared why one of the most common mistakes businesses make is waiting to form a legal entity, saying, “For you to have that personal liability protection, while you’re operating your businesses, you need a business entity, such as an LLC or corporation right from the start. I’ve had entrepreneurs whose accountant will say, ‘Wait until you make X number of dollars, and then it’ll justify the amount you’re paying for a franchise fee or some of the additional costs.’ But this is a big mistake because it’s like doing business naked. Those businesses do not have anything protecting their personal assets from a claim or a lawsuit. They are also missing out on the ability to develop corporate credit right from the start under the tax identification number for the new entity. It’s a little bit like giving a college student a credit card. As soon as the entity comes to be, it doesn’t have that credit history. But a lot of the more institutional lenders, when getting a line of credit, usually those banks are looking at a minimum of three years of financials. So if you wait to form the entity until after you’ve started doing business, you are not protected, and you lose the opportunity to develop that corporate credit. Also problematic is that a lot of the long-term contracts that you sign at the beginning of your business, you’re signing a lease, you’re signing a franchise agreement, maybe some long-term client agreements, and all of those contracts are in your personal name or a DBA. But those contracts are very difficult to transfer into the entity once it’s formed… so that’s why it’s so important to have the entity in place right from the start. And it’s also important to ensure you have the right entity.”
As a renowned business attorney who has received many commendations for her professionalism and dedication to entrepreneurship, Chase has achieved the Martindale-Hubbell AV Preeminent Peer Review Rating, a prestigious honor for the highest ethical standards and professional ability awarded to only approximately 10% of attorneys, every year since 2016. She was named a “Woman to Watch” by the Los Angeles Business Journal and honored as a “Woman of Entrepreneurship” by Comerica Bank and the Los Angeles Lakers. Her firm was nominated as the “Best Law Firm for Small Business” by the Best of Small Business Awards, and she was listed in the Top 100 Small Business Visionaries.
Chase has a remarkable ability to cut through the uncertainty and confusion regarding legal issues and is passionate about sharing her wealth of legal knowledge to help entrepreneurs and business owners avoid costly mistakes and lawsuits.
Listen to the full episode at – https://InfluencersRadio.com/deann-chase
To learn more about DeAnn Chase and Chase Law Group, visit https://chaselawmb.com