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Top 3 Mistakes Business Owners make on the legal side

Rav: Hello everyone. Today we’ll talk about the top three Mistakes Business Owners Make on the legal side. The official podcast of BNI successfully, your length to success.

 Hello again, everyone. I’m your host, Rav Mendiratta from Socio Squares, when landing leads is where my business leads. Today, we will talk about the top three Mistakes Business Owners Make on the legal side. And I have an expert with me here, Rich Paulson, a business attorney, and Rich, welcome to the show. 

Rich: Thank you, Rav.

Rav: And Rich, why don’t we start with you introducing yourself and telling our audience about your background?

Rich: Sure, I have a business attorney. I’m located in the city of Alameda and have been an attorney for over half my life now. But I’ve been solo for the last eight years. I work with local businesses, litigation, and transactional matters, be it contract claims, fraud claims, losses between firms, and lawsuits between business owners. I also do transactional work, entity formation from an LLC Limited Liability Company, corporations, partnerships, business succession plans. On top of that, I’m the chair of the Business Law Section for the Alameda County Bar Association and the board of directors for the city of Alameda Chamber of Commerce.

Rav: That’s awesome. So it’s so you’ve seen the entire gamut from the business inception to succession. That’s awesome. And I’m sure our audience can take many learnings from this session.

Rich: You learn many lessons practicing in those areas.

Rav: Cool. So let’s start with the top three things every new business owner wants to incorporate in 2022. We are already in February, but 

What would we say are the top three things a new business owner should consider before incorporating them?

Rich: Sure, 

  • 1) Type of Entity : I think the first issue is, what kind of entity will you make. And California has some options to be a sole proprietor, go out, get a business license, and when you’re off and running, you can form a limited liability company or LLC. You can develop a corporation. You can form a partnership; each one has different operating costs, franchise tax fees, and other liability protections that they offer. And there could be additional tax consequences. So understanding the different types of legal entities you could be, is vital for any business owner to know. 
  • 2) Business Operation in Legal Sense : The second issue is really how to operate the business in a legal sense. I love business owners who know the product that they’re providing, the service they’re providing, but they don’t necessarily know how to maintain an LLC or a corporation. I mentioned there might be annual meetings; there may be fees, there may be annual filings that need to be done. Failure to adhere to those can mean losing that legal entity and some of the protections they afford you. 

3) Business Succession Planning : And then the last thing is something that business owners rarely think about when they’re starting out. But what they should keep in the back of their head is…

What they will do next, business succession planning is very important. 

You want to know who’s going to take over the business, a family-owned business? 

Who’s going to take the rain?

Is that person available?

Are they qualified? 

Are they available to do it?

Sometimes people are involved in the business, and they can have a life event, divorce or bankruptcy, death, and the business is kind of wrenched out of their hands. So by planning ahead, you can avoid some of those problems for the learners.

Rav: Wow, that sounds like much thinking I should have done before I incorporated, but it’s been ten plus years now. So I hope I’m on the right track.

Rich: Well, you can always have reviews. It’s never too late. You can do conversions. If you have one sort of entity, you can change it to another, and sometimes for tax purposes, you may not need to make it right away but later down the road, so it’s never too late to get a check.

Rav: That’s interesting and thank you for that insight. That’s a good segue into my next question for you is

What are the top three essential business issues you’ve seen? 

Which business owners face or it might be litigation, lawsuits or other types of problems? 

So what would you say are the top three?


  1. It would be a failure to adhere to a lot of those requirements: I spoke about earlier on top of violating franchise tax beings as appropriate, finally, finding that the Secretary of State, sometimes business owners, there’ll be mismanagement of funds will be a commingling of funds connecting will result in litigation between business owners. 
  1. Another issue I see with life is a failure to vet the other side of a country: Where you can buy a product that’s never shipped; you may ship a product that’s never paid for, sometimes business owners have to act quick. And they can’t do a lot of the vetting you would want. In a normal business setting, they see a good deal, they have a product they need quickly, decisions are made rapidly. And well. That’s something that they need, that’s the fact of the way business is done sometimes. But a lot of times when businesses fail to do that, it can be a lot harder to ride the ship when the other side doesn’t fill in their obligations under the contract. 
  1. It’s a lack of clarity in this contract: So many people will, businesses will use the same contracts repeatedly and situations or circumstances Lalibela, which makes it difficult for one party or the other to fill the obligations of the contract. Also a lack of clarity as to what to do next, what the revenues are, where the next stage is. And that can result in litigation itself. A good contract is where everyone does what they’re supposed to do. A great contract is when everyone does what they’re supposed to. And it’s enforceable in a court of law, a lot of people have good contracts, that doesn’t make it a great contract, you don’t want to have to worry about how it’s going to hold up in a court of law. But when things go wrong, that’s very important. So it’s something that you have to plan for the now

Rav: It’s a very interesting distinction between a good contract and a great contract. And I have known startups and entrepreneurs who would use contracts right on the internet. So I’m sure they don’t even fall under the good category.

Rich: A lot of them and it can be a very state-dependent contract that’s enforceable in Illinois isn’t necessarily going to be enforceable in California. California has particular laws which can be very consumer-friendly in some areas. And they will put limits on what people can contract to do or not to do: different laws with interest rates, different laws regarding penalties, and things like that. So it is good when you’re entering into a contractual relationship with the business to understand what you agree to and what the revenues are.

Rav: That’s quite interesting. And I didn’t realize that there could be so much difference by state. So thank you for sharing that. And talking about contracts reminds me of contractors less because we work with a lot of home improvement contractors. What would you say is the top issue you have seen with home improvement contractors as business owners and on the legal side of things:

Rich: The ones that I’ve worked with are so busy, especially lately here in the Bay Area, that they’re focused on their day-to-day job body, for the clients for growing the business, what they don’t really think about is business succession planning. Many contractors that I work with family-owned businesses, they want to hand off that business to the next generation. Or even if it’s not a family member, they want someone in place in case something happens to them; they become disabled, something tragic happens. But being able to plan ahead can save a lot of trouble. And many fees down the line. And with contractors being so busy with a day to day business, it’s hard to get them to focus on that. But once they kind of understand the value of this session planning, they always feel like it’s worthwhile.

Rav: That’s a great insight. And I’ll be sure to pass this along to my clients. Thank you. The final question I have for you is that I got to ask this just because I’m in digital marketing. So what are the top three or the top strategies which have worked for you when it comes to marketing your website or your web presence?


Word of  Mouth Referral : Well, I rely heavily on word-of-mouth referral, someone that knows, likes, and trust me, organizations like BNI are a great source of those qualified referrals. 

Social Media Presence : But even the best referral I see the client for they called me they get online and they check out my social media presence and I think it’s crucial for me not only to build that reputation so that I will get those referrals but make sure my reviews are good or up to date. I get a lot of frozen people checking out the Better Business Bureau site. You know that regardless of how good that word of mouth referral is, I want to maintain a good social media presence because I know that’s always going to be checked in before they give me a call.

Rav: That’s pretty awesome. I’m familiar with a few platforms like juste and Evo. But it’s great to hear that online reviews have an impact on your business. And it sounds like it’s more on the conversion side than the awareness side, where your online presence helps you.

Rich: I think that’s true. I heard a good website won’t get you a client, but you could lose a client with the bad. So I think it is essential to maintain. But I have had a lot of customers say that they heard about me, but the first thing they did after they heard about me was they checked me out on their own little investigation. So it is imperative,

Rav: right. And actually, that’s a good tip for anybody who’s starting off as an attorney to have a good website and have a website, which is not just a brochure put upon on the online version, but a website that informs the user with the power of reviews with social testimonials and social media presence. Great. Thank you so much, Rich. This was a fantastic session. Thank you for your valuable insights, and I’m sure our audience would love this. Thank you again. 

Rich: Thank you for appreciating the opportunity.

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