While business mistakes are considered a means of unravelling some entrepreneurial secrets, some are too costly and could land you in Jail.
Some entrepreneurs focus only on the big picture, thus neglecting the little details that can lead to unanticipated complications.
According to A. J. Yolofsky, the founder of Yolofsky Law, when it comes to money mistakes that can get you into legal trouble, there is almost no limit on the possibilities.
You should avoid some of these business mistakes if you don’t want a jail experience.
Carelessly appending your signature on documents
Always double-check a document before signing it to avoid sticky situations. For instance, co-signing or standing as the guarantor for a loan is a terrible idea.
You will be legally accountable if the borrower doesn’t pay it back. When a borrower cannot repay the loan and flees, you, the co-signer, will be held responsible. If you can’t afford it, your assets will be used to pay for it.
If the police are involved, you will see the four walls of a prison. Therefore, before you append your signature, know what you are signing.
Separate your personal finance from your business
Learn to separate your business account from your personal account. When entrepreneurs combine the two, they frequently run into legal issues.
If the company’s account is audited, the personal assets too will be exposed to unnecessary scrutiny since there is no distinction between the business and private funds.
Also, if sued for mismanagement of funds, you won’t be able to clear your name as you have been tapping into the business account for personal use or spending your own private money on your business.
Therefore, create an account for your business and keep a tab of the revenue no matter how little it is or nothing at all.
Not paying taxes
The first thing is to know your state’s tax structure and how much to pay. There is no ignorance in law. Evading tax has profound legal implications, including a jail term.
It’s been observed that many small business owners, especially in Nigeria, do not take tax payments seriously until the authorities come knocking and threaten to close down their business.
One more piece of advice, don’t try to bribe your way out of it because it will only hold the tax officials off for a while. The bribe won’t erase what you owe. A new set of tax enforcers will probably come knocking on your doors, and it would only complicate the matter.
Therefore, it is beneficial to keep track of your business by filing returns from day one, even if you are not generating any revenue.
Be wise with loaning money to people
Be wise with your money and cautious with who you borrow your money. If you must, document it by having black and white evidence such as a promissory note.
However, if you don’t properly document the loan, you won’t be able to use the law to recover the funds. The court will not compel the payback if there is no documentary evidence.
According to the founder of Yolofsky Law, A.J. Yolofsky, it’s good to loan money to friends and relatives with whom you want to maintain an excellent relationship. But have the understanding that they would never repay.
Always be cautious with paperwork
Some expensive blunders may only be prevented by exercising extreme caution and diligence, as it might be impossible to reverse a mistake that has been made.
Here is a case study: a banker filling out a bankruptcy document made an innocent mistake. He ignorantly committed fraud by making a typical, harmless error which resulted in being sentenced to Jail.
He cashed in from the retirement account and failed to report the IRA dividends as income on his tax return. This was, however, considered fraud and convicted.