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5 Common Mistakes Made Prior to Starting Your Business

80% of new businesses fail within one and one-half years after their start-up. Failure to properly plan and evaluate the needs of your business will lead to failure. It is important to lay a solid foundation that will support your business enterprise. The following are 5 common mistakes people make prior to starting a business.

  1. ) No Business Plan. In my practice as a business attorney in Louisville, KY, I have seen no better mechanism to help ensure your business’ success than a well-thought-out and vetted business plan. The process of developing a business plan forces one to address multiple levels of planning some of which include market analysis and planning, financial projections and cash flow analysis, organization of management team, sales strategies, just to name a few items. A business plan provides the forethought that helps you springboard to success.
  2. ) Insufficient Capital. Lack of start-up capital is a major contributor to business failure that I have encountered as a lawyer. Cash is king. It takes time to position your business to throw-off enough cash flow to cover expenses. Many entrepreneurs under estimate the capital needed to get their business over the hump. Often, companies do not have adequate financing (e.g. lines of credit) to sustain it during its initial stages.
  3. ) No Business Structure. A typical mistake of a small start-up business is not availing itself of a business structure that may shelter the business owner from personal liability. Corporations and Limited Liability Companies may afford such protection.
  4. ) Failure to Have a Formal Ownership Agreement. Entities with more than one owner should prepare a shareholder, operating or partnership agreement (whichever is applicable) between themselves to be used as a road map for many company and ownership issues. These agreements address various items and triggering events such as capitalization, distributions, voluntary and involuntary transfers of ownership interest, death, disability, and ownership buy-out. If there is no contract between owners, your business may dissolve or litigation may ensue without a written understanding of how to handle certain events. Such an agreement will help hurdle the roadblocks that may be encountered.
  5. ) Failure to Assemble a Team of Outside Advisors. You do not know as much as you think. You may believe that you can handle matters on your own. However, what you do not know may hurt you. It is important to develop and utilize an advisory team that includes attorneys, accountants, bankers, insurance agents and others to help you navigate financial success and protect your company from liability.

Richard A. Greenberg

Richard A. Greenberg, PLLC
2321 Lime Kiln Lane
Louisville, KY 40222

(502) 429-8496

[email protected]
www.richardgreenberglaw.com

Copyright 2018 – Richard A Greenberg, Louisville, KY – All Rights Reserved

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GROWING YOUR BUSINESS IN LOUISVILLE? TAKE ADVANTAGE OF THESE TWO LOUISVILLE METRO RESOURCES

ADVICE AND RESOURCE INVOLVEMENT:

I have written about the EnterpriseCorp in a previous blog but it is worth discussing this gem again. As the “entrepreneurial arm” of Greater Louisville Inc. (the City of Louisville Chamber of Commerce), this organization provides advice and assists local businesses and entrepreneurs in growing their businesses through analysis, strategic development, capital growth assistance and resource involvement. EnterpriseCorp.’s focus on providing resources to the local Louisville Metro business community is where the organization really shines. It offers business plan templates, models for investor presentations, identifies and provides assistance with funding sources, presents CEO roundtables and much more. It is well worth it to take advantage of the resources that EnterpriseCorp. provides local Louisville businesses and entrepreneurs.

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New Tax Incentives for Angel Investors

On July 23, 2014, Kentucky Governor Steve Beshear signed into law House Bill 445, which expands the Kentucky Investment Fund Act and provides tax credits to “angel investors” with the aim of encouraging individuals to invest in small local startups and businesses.

Effective January 1, 2015, angel investors who invest a minimum of $10,000 dollars in local businesses with “high growth potential” in fields like information technology, bioscience and advanced manufacturing, can receive a tax credit equal to 50 percent of their investment if the startup is located in a county that the state has determined is economically depressed. Investors can receive up to a 40 percent tax credit of an investment in businesses located anywhere else within the Commonwealth. The maximum annual credit that can be awarded to an angel investor is $200,000 dollars. The law also provides some tax incentives to angel investors outside of Kentucky. Investors who reside outside of Kentucky can transfer tax credit to state residents and under the new law. If the Kentucky resident purchases the credit, the out of state investor can then recoup some of their investment. [Read more…]

LEGAL TIPS FOR START-UP BUSINESS OWNERS AND OPERATORS

BUSINESS STRUCTURE

A typical mistake of a small start-up business is not availing itself of a business structure that may shelter the business owner from personal liability.  Corporations and Limited Liability Companies may afford such protection.

BUSINESS PLAN

A well thought-out and well vetted business plan is an essential element to business success. Business plans should include, without limitation, market analysis and planning, financial projections and cash flow analysis, organization of management team, sales strategies, just to name a few items. A business may be subject to liability and incur significant legal costs due the lack of sufficient forethought. [Read more…]

Dancing with the Prospect Stars

I will be putting one foot after another Dancing With the Prospect Stars in support of the Special Olympics. Come join me on 2/9/14 at the Mellwood Arts Center in Louisville, KY. To learn more please go to www.dancingwithprospectstars.org.

Product to Market – Temporal Viability

I recently returned from Israel where I had the privilege of watching my daughter, Peyton, compete in the 19th Maccabiah Games representing the United States of America in swimming. The Maccabiah Games is the third largest international sporting event in the world. Thousands of athletes from around the world converge every four years in Israel to excel in their respective events. (By the way, Peyton won a gold and two silver medals).

The sporting venues are filled with fans cheering on their countries and athletes. At the swimming venue, there was downtime from the competition that allowed me to intermingle with the other spectators. [Read more…]

Procurement of Growth Capital & Entrepreneur Support in Metropolitan Louisville

The Louisville, Kentucky business community holds a gem that is harbored by Greater Louisville, Inc. (Louisville, KY’s chamber of commerce). It is known as “EnterpriseCorp”. EnterpriseCorp provides advice and growth capital services for local businesses.

EnterpriseCorp assesses and assists your business through the use of benchmarking, operational analysis, strategic development, and implementation of the strategies. EnterpriseCorp’s advisory counsels are comprised of successful individuals who provide beneficial advice.

Growth Capital is imperative in the development and the continuation of your business. EnterpriseCorp can be used as a mechanism to help identify capital streams in various forms (e.g. grants, angel investors, accelerators, venture capital, and equity funds). EnterpriseCorp can introduce you to the players in the growth capital arena. [Read more…]

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