New business owners have a lot to consider when starting out. Their best strategy is to recruit the assistance of an experienced professional to guide them along the way. Many of the missteps common to inexperienced business owners can be extremely detrimental to the growth of a business. Some of the more common mistakes that new business owners make are as follows:
- Failure to complete the organization process. Because Arizona only requires businesses to file articles of organization or incorporation with the Corporation Commission, new businesses sometimes take this step but neglect to establish an operating agreement or bylaws, or hold required meetings. Businesses without these tools lose the ability to control important aspects of the operation.
- Failure to file an Affidavit of Publication. Businesses that fail to take this step are subject to administrative dissolution.
- Failure to issue stock. Without stock certificates, there is no proof that the business was properly funded, making owners more susceptible to personal liability.
- Improper change of the statutory agent. Every Arizona business must have a statutory agent, and while businesses can change their agent at any time, they must do so through the appropriate channels.
- Improper change in members of an LLC. LLCs are permitted to add or remove members, but every change must be properly documented.
- Failure to comply with business formalities. Businesses must adhere to business formalities in order to avoid legal and financial complications. To name a few of these formalities, businesses should meet in board or shareholder meetings and keep meeting minutes, make resolutions, file annual reports with the Arizona Corporation Commission, adopt a buy-sell agreement, adequately capitalize the venture, obtain licensing, adopt an employee manual and make amendments to the Articles of Incorporation as needed.
