Financial Mistakes Commonly Made During Business Formation

Very few things can ruin the momentum of starting your own business like a big financial mistake. We’re entrepreneurs too, we know just how difficult it can be to launch your own business. We also know how awful it is to feel like any of the efforts you put forth has gone to waste–it’s especially awful when you are talking about money. Here are some of those common mistakes that are made during the formation of a business.

Mixing up Personal & Business Assets

This is easily one of the worst financial mistakes a new business owner can make during the start of a company–failing to separate their business and personal assets. It can be really dangerous if you are relying on your business to shield you from liability. If you are using one bank account for both, for example–it can cause your corporate veil to be pierced and result in harsh tax penalties. Keeping the money separate also gives you a more accurate look at how your company is performing, it also protects your credit score from dropping should your business go under.

Non-Attorney Formation Services

As a business-focused firm, we’ve put a focus on streamlining our business formation services so that they can be accessed by everyone. Few things frustrate us at Dowd Law than “reduced-cost” non-attorney business formation services claiming to be a cheaper option to lawyers… But these services are usually scams–charging for paperwork you can file on your own. They can’t even give any legal advice and are likely to charge extra for documents that firms, like ours, include in service packages. Sometimes you still end up spending more than what you expected and then some!

Making Big Purchases Too Early

Everybody knows that starting a new company requires one thing–money. But that capital isn’t permission to spend freely. Making money sometimes requires spending money, but going after those big-ticket pieces before you’ve gotten a stable stream of income can send your business into debt early on. Sometimes you need to decide what things to spend on, and what should be saved so that your company has the most potential in the long run.

No Preparation for Harder Times with Business Formation

A big mistake many new business owners make is not prepping for when harder times roll in. Even when you have a high-profit margin and enthusiastic customers after the launch–you never know what may happen. Natural disasters, or other circumstances, like an economic recession may impact your business’s financial future. Just think of how quickly a hurricane can change the course of your business work week, and that’s if you only need to close for a few days. That’s why smart owners will save their company credit cards for these emergencies, it’s also a good idea to have enough in your savings to cover at least three months of business expenses, on top of your own personal savings account.


These are just some of the things that can be overlooked when starting a new business. Remember to trust us at Dowd Law with all of your small business’s legal needs! Our legal experts will make sure to help you avoid these mistakes and more!