Legal Trouble Often Starts with Overconfidence
Utah has a strong entrepreneurial spirit—but that doesn’t mean every new business owner understands their legal obligations. From contracts to compliance, the early decisions you make (or ignore) can lead to expensive consequences.
These are the five most common legal mistakes Utah small business owners make—and how you can avoid them.
1. Skipping a Written Operating Agreement or Bylaws
Even if you’re a solo LLC owner, having a written operating agreement is critical. It documents ownership, defines rights and responsibilities, and prevents disputes—especially if your business grows or takes on partners.
Common mistake: Relying on handshake deals or assuming you don’t need documentation because you’re “just one person.”
Avoid it: Draft clear internal governance documents early on. They’re useful even if never enforced in court—and essential if they ever are.
2. Using Generic or Unenforceable Contracts
Many business owners rely on contracts they find online—or worse, none at all. But vague, outdated, or incomplete contracts leave you exposed to lawsuits, liability, and payment disputes.
Common mistake: Using one-size-fits-all templates that don’t reflect Utah law or your business model.
Avoid it: Use Utah-specific contract language tailored to your business type, services, and client relationships. Need a place to start? See When Walking Away Isn’t the End: How Smart Negotiation Secured a Strong Settlement for a real-world example.
3. Misclassifying Workers as Independent Contractors
Utah small businesses often misclassify employees as independent contractors to avoid payroll taxes or benefits. But if challenged, you could owe back wages, penalties, and tax liabilities.
Common mistake: Treating workers as contractors just because they want to be—or because it’s “easier.”
Avoid it: Understand Utah’s and the IRS’s criteria for employee vs. contractor status. For details, see our post on Independent Contractor or Employee? Avoiding Worker Misclassification in Utah.
4. Neglecting to Maintain Business Formalities
If you form an LLC or corporation but operate like a sole proprietor, you risk losing limited liability protection. Courts can “pierce the corporate veil” if you don’t treat the business as a separate legal entity.
Common mistake: Mixing personal and business funds or signing contracts in your own name instead of your company’s.
Avoid it: Keep separate bank accounts, document major decisions, and use proper titles when signing anything on behalf of the business.
5. Ignoring Legal Disputes Until It’s Too Late
Whether it’s a client who won’t pay, a vendor who breached a deal, or a partner dispute—ignoring legal issues rarely makes them go away. Waiting too long can limit your legal options or lead to default judgments.
Common mistake: Hoping things “blow over” instead of addressing conflicts early with a written demand or settlement offer.
Avoid it: Use well-drafted demand letters and consider mediation or early negotiation. (More on that coming soon in our post on demand letters.)
Final Thoughts: Legal Mistakes Are Avoidable
Running a business is hard enough. Don’t add legal headaches to your to-do list by skipping foundational protections. The good news? Most of these mistakes are easy to prevent with early planning, the right legal documents, and solid advice.
At Duckworth Legal Group, we help Utah business owners avoid trouble before it starts. Whether you need contracts, compliance advice, or help with a current dispute, we’re here to support your success.
Call (801) 882-7444 or email info@duckworthlegalgroup.com to schedule a consultation.