5 Avoidable Mistakes Utah Businesses Make Everyday

Running a business is not easy.  It requires drive, discipline and the ability to identify and provide a product or service that people truly need.  Utah business owners can take steps to avoid complicated legal problems and ensure future peace of mind by avoiding these five common mistakes:

 1.     Undercapitalizing

Corporation law has paved the way for individuals to invest their savings in large, risky businesses while enjoying limited liability and avoiding management responsibilities. Most who jump through the hoops to organize a corporation or limited liability company (LLC) wrongly assume that this protection is absolute.

Certain circumstances may lead a court to decide that it would be unjust and unreasonable to recognize the limited liability generally granted by a corporation or LLC.  When this occurs, creditors can satisfy their judgments against a corporation or LLC through the owner’s personal assets.  Holding shareholders and members personally responsible for the debts of the business entity is a process known as “piercing the corporate veil”.

One of the more common mistakes leading a court to find personal liability is undercapitalization.  A creditor may be able to attach your personal assets to satisfy the corporation’s debt if your company does not have the assets necessary to pay a creditor’s claims, the financial insufficiency existed at the time the debt was incurred, and the insufficiency was so severe that it constituted gross undercapitalization.

 2.     Co-mingling Funds and Ignoring Formalities

Another easily avoidable instance where the court may pierce the corporate veil is when a shareholder has used corporate assets as if they were his own.  The defining feature of a corporation is its independence from the people who create it.  If you are ignoring the separateness of your business entity, why should the rest of the world?  For this reason, it is important to keep personal funds in your own pocket, keep business funds separate, and make sure that you’ve satisfied all the requisite formalities of your particular business entity.

3.     Hiring an Inexperienced Accountant  

In an attempt to save money or time, small business owners may try to take on accounting themselves.  They may also turn to Aunt Mildred or an old high school football buddy that took an accounting class decades ago.  This is a bad idea.  It is important to hand over important fiscal responsibilities to a trained accountant, CPA, or tax attorney.  Look for an accountant that has had other small business clients and is knowledgeable about business tax preparation.

Bad Accountant

4.     Inadequately Protecting Intellectual Property or Infringing on the Rights of Others

Many businesses may not think that their logo, product or services warrant legal protection.  It is important to make sure that something as simple as your company name isn’t trademarked.  Clearing up issues regarding trademarks, patents and copyrights ahead of time is important; as it can become more difficult to protect them down the road if a third-party starts doing something similar.

5.     Drafting Faulty Contracts

Failing to find a skilled contract attorney can lead to a transaction blunder that costs big money.  Business owners may enter into a contract without having a clear understanding of their rights and obligations, and breaching a contract may lead to mediation or litigation that is stressful and time consuming.  Cutting corners by finding online contract forms can also be unwise.  Contract forms may be out of date or lack important language.  For these reasons, it is important to hire a lawyer to draw up contracts, especially if these contracts make up the foundation of your business.

Contingency Litigation for Wills & Trusts

Contingency Litigation is a fairly simple concept. Essentially, when an attorney takes a case on contingency, they are agreeing to represent you on the bases that if you don’t get paid, neither do they. A contingency lawyer makes only a percentage of the overall settlement and therefore does not get paid if his client loses. Contingency Litigation is a very important service for people who need legal representation but do not have the cash up front to pay a retainer and hourly rates while the case is still ongoing.

How Can Contingency Litigation Help With My Estate Dispute?

More often than not, this is only necessary when the deceased did not leave behind a will but can also be an issue if a will was left but not all personal assets were defined in the will. When no will is left, an administrator is assigned to fairly divide the assets among the remaining living relatives. If one of the living relatives is not satisfied with the way a trust has been administered, they may dispute the trust. This where contingency litigation comes in, if a person is being unfairly left out of a trust administration, they can contact a lawyer to represent them on contingency in order to help them get a fair inheritance.

Estate Disputes

Is This a Common Dispute?

Unfortunately, this issue is much more common than it should be. While living relatives are often left out or under-compensated during the administration of a trust, litigation for estate disputes happen much less frequently than they should. Whether a result of the person wanting to keep peace with the family or simply not knowing where to turn for help, many people go unrepresented and without recourse. Nobody should ever have to go without the help they need in these matters because they don’t have the money for a retainer, so contingency-based litigation is offered by some attorneys to help those who are not in a situation to help themselves.

What if There Was a Will?

Wills can be challenged under certain circumstances and if certain criteria are met, these criteria include:

  • The FAMILY PROTECTION ACT of 1955 allows you to dispute a will if you are a close relative to the deceased and you feel you have not been provided for properly.
  • If the deceased promised to provide for you under the will in exchange for a service that you provided. Whether you’re related to them or not, you may dispute the will under the LAW REFORM (TESTAMENTARY PROMISES) ACT of 1949
  • Under the PROPERTY (RELATIONSHIPS) ACT of 1976, you can forego the disbursement of a will left by a spouse or civil partner, instead choosing to have the property of the relationship divided under equal-sharing rules.

Whatever reason you have, don’t just assume that there is nothing you can do. If you haven’t been provided for fairly by a relative’s estate, contact a lawyer who specializes in wills, trusts, and estates to find out if they can take your case on a contingency basis.