Whether you are starting a new business or taking over an existing one, several types of business transactions are required to keep the doors open, lights on, and to see growth potential for any size organization.
We are all subject to human error. However, one mistake, no matter how minor or insignificant it may seem on the surface, can become a very big problem if left unchecked. That is why it is important to properly plan, draft, and document the appropriate pieces of each business transaction.
3 Common Mistakes Made During Business Transactions
Without implementing the appropriate planning necessary for your business transactions, you could be compromising your company’s financial health, reputation, and professional integrity, which could also lead to insolvency or complex legal battles.
The following are three common mistakes that people often make during business transactions that could easily be avoided with the help of a business law attorney.
#1: Not creating non-competes or non-disclosure agreements
You’ve probably heard the saying “Your word is your bond.” With decades of legal experience under our belt, we have seen individuals trust another’s word at face value and compromise themselves too many times. Having properly worded, legally binding agreements is in your best interest to help protect many different aspects of your business.
For example, a non-compete agreement can help you avoid having a longtime employee or contractor create a competing business and use your business transaction processes, strategies, and techniques to compete with you, or even contact your own customers.
Additionally, a well-worded non-disclosure agreement would bar someone from disclosing your trade secrets, industry insights, or any sensitive information that you have regarding your business and business transaction processes, as outlined in the agreement.
If you feel that you have sensitive business transaction processes and are concerned that employees or contract workers may disclose that information, you should consider consulting with a business law attorney who can help determine if a non-compete or non-disclosure agreement is in your best interest.
#2: Assuming profits are the same as cash flow in contracts
Another common mistake that companies make during business transactions is short-changing themselves by inaccurately portraying their scope of work. Oftentimes, professionals don’t account for potential delays that can arise down the road or cushion their contracts for potential cost increases in materials or labor, which can easily make the estimated proposal cost inaccurate, causing them to lose money on the project.
While you may be tempted to account for each deal as immediate income, you should hold off until the payment and project have been completed, as profits are not the same as cash flow. If you don’t wait, then you run the risk of short-changing yourself, making your company look healthier than it really is, and not having an accurate picture of your company’s financial health to plan accordingly.
Not only should you associate with a business law attorney that can help you with your legal matters, but you should have a team of other professionals, such as an accountant, to help you with other areas of your business – such as keeping accurate records on your books and financials.
#3: Wording their contracts poorly
Contracts are an important aspect of nearly every industry and business transaction, from customer agreements, to buyer and seller agreements, to distribution agreements.
Properly worded contracts can be written by an experienced attorney who has a strong understanding of Florida contract law. This can help you ensure the soundness of your agreement and also save you time and money if the contract is needed to be enforced in court.
Avoid Making Common Business Transaction Mistakes
Avoiding these common mistakes can reduce negative impacts on your business transactions and the organization’s financial health and wellness.
At Apfelbaum Law, we have had counseled and assisted national and international businesses, small, medium, and large, and entrepreneurs with the legal planning of their business affairs throughout any stage of their company.
This type of planning can help prevent costly and time-consuming legal issues later on. Contact us today to learn how we can help with your business law needs.
