Both small and large business corporations experience their fair share of mistakes on a regular basis. While it's important to experience some mistakes in order to learn from them, there are some slip-ups that you and your business would be much better off without. The #1 mistake that business owners make is the lack of legal binding paperwork. Too often, business partners rely on a good old handshake to seal the deal but in reality, there is nothing protecting the parties involved if someone goes back on their word or something doesn't go according to plan. Whether its two old friends or even strangers who are so enthusiastic about a new business opportunity, they overlook the legalities, this type of mistake happens every day and can have grave consequences for those involved.
How This Mistake Can Affect You
Oftentimes, it's not until a problem arises that people realize there should have been something in writing in order to provide protection – contacts are imperative in order to protect yourself and your business. Things become much harder in a disagreement if no records exist. The job of undoing the relationship becomes doubly hard for all parties concerned, including the attorneys who are requested to do the unraveling.
With no paperwork in place, the court will likely treat your case as a partnership, if the parties share equally in the costs and expenses of the business. Partnerships are overseen by the Uniform General Partnership Act enacted in California, which sets forth how partners are to be treated in the event no partnership contract exists. The second most common mistake that partners DO get contracts drawn up but they are incorrect, leave out information, or use the wrong wording to imply things that aren't the case. Oftentimes, bad paperwork is even worse than no paperwork at all.
How to Avoid This Mistake
The best way to avoid this mistake is to create a fool-proof contact, drawn up by an experienced California business litigation lawyer. There is certain wording that must be used to create a correct document, and a good lawyer will be sure to cover all the bases so you can rest easy knowing both you and your partner(s) are protected if something goes wrong or a disagreement occurs.