The 4 most common mistakes new business owners make

Man and young woman look confused at computer screen in a new bakery business.

When you launch a business, it’s all about the lean start-up. You get used to being resourceful and reinvesting what you can for growth. DIY is the backbone of all small businesses. We know, because we are one. So, we’ve put together a list of common pitfalls to help you avoid some annoying and expensive mistakes.

1. Not registering a business name

A business name helps people identify who you are and that you are a genuine business. You must register a business name before you start trading. The only exception is if you are using your own legal name.

2. Trademark registration

Picture this: You've spent countless hours brainstorming the perfect name for your business or that killer product you're about to launch. You're all set to conquer the market, but there's one crucial step you might forget – trademark registration. A trademark is your business's signature; it gives you exclusive rights to your brand name, logo, or slogan. Without it, you're leaving the door wide open for copycats.

If you're investing time, effort, and resources in building your brand, it's crucial to assess the availability of your brand name and secure it if possible. Neglecting this step can lead to trademark infringement.

Remember, business or company name registration, while common during business setup, are administrative and don't offer ownership privileges. On the other hand, trademark registrations, ensure comprehensive protection. These registrations do take time though so initiating the process now is advisable.

3. Wrong business structure

Many new business owners opt for sole trader or partnership structures to save costs, unaware of their potential drawbacks. These structures are suited for low-scale, low-risk ventures as personal liability prevails if something goes wrong. Imagine your business hits a rough patch, and you owe some money to clients or creditors. If you're a sole trader or in a partnership, they could potentially sue you and seek your personal assets to cover those debts. Consider choosing a company structure. This means you create a separate ‘legal entity’ that shields your personal assets from business troubles, except in rare cases.

For more complex businesses, like start-ups with intricate ownership structures, there are options like multi-company setups or trusts. They can be a bit complex and require some legal and tax advice, but they provide extra protection and liability reduction benefits.  

The key here is to choose the right structure early on or at the beginning of your business journey. Waiting too long to restructure can lead to complications and financial losses down the road.

4. DIY-ing legal documents

We get it – lawyers can be expensive, and legal jargon can be confusing. However, attempting to draft crucial legal documents using templates or online tools can be a real gamble.  

Drafting your own documents may lead to severe legal, financial, and reputational repercussions. You might end up with the wrong document type, accidentally break some regulations, fail to protect your business adequately, or just come across as unprofessional. And that's not a gamble you want to take when it comes to your business's future. For important documents, it's advisable to consult a lawyer who can tailor documents to your specific needs, protecting your business from potential liabilities. It’s probably helpful to know that you can ask a lawyer to review for specific risks rather than a full review. This means you can revisit the document when you have the budget.

By avoiding these common legal errors, businesses can pave the way for smoother operations and sustainable growth.

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