The $500 (or More) Mistakes Small Businesses Make
Quick note: I usually send this newsletter on Mondays, but this week got away from me. Thanks for your patience—back to our regular schedule next week.
Recently, a client paid me for two hours to help get their LLC reinstated after administrative dissolution. The reason? They didn’t file their annual report. The report would have taken 15 minutes online. Instead, they paid reinstatement fees, my hourly rate, and dealt with weeks of uncertainty about their business status.
Completely avoidable.
Small business owners juggle everything from payroll to product development, and administrative details slip through the cracks. The frustrating part isn’t just the money—it’s that these mistakes are entirely preventable once you know what to watch for.
The Filing and License Trap
The mistake: Missing deadlines for annual reports, tax returns (income, sales, franchise), or letting business licenses and professional certifications expire. Or never getting the required licenses in the first place.
The cost: Many states skip the late fee and go straight to administrative dissolution. Once dissolved, you’re paying reinstatement fees ($200-$500), potential penalties, legal fees, and dealing with business disruption. For tax returns, penalties and interest compound quickly into hundreds or thousands.
For licenses, continuing to operate with an expired license or without the proper license isn’t just administrative—it’s often a crime. Misdemeanor charges, fines, voided insurance, shut-downs, and penalties for every day you operated illegally.
How to avoid it: Set three reminders for every deadline: 60 days out, 30 days, and 7 days. Better yet, file early when you’re thinking about it. Keep a master spreadsheet of every recurring deadline: annual reports, tax filings, licenses, certifications, insurance renewals, domain registrations.
When you receive any license or permit, immediately calendar the expiration date with a 60-day advance reminder. Don’t wait for renewal notices—many jurisdictions don’t send them. If you’re licensed (contractor, real estate, cosmetology), check your state board website quarterly to verify your status is current.
If you’ve expanded services, verify you have all required licenses for what you’re actually doing now, not just what you did when you started.
The Sloppy Contract Problem
The mistake: Using incomplete contracts, verbal agreements, or outdated internet templates.
The cost: Simple contract disputes cost $2,000+ in legal fees. More complex issues run tens of thousands. The $500 version: hiring contractors without clear scope, engaging vendors without written payment terms, bringing on partners with handshakes.
Generic templates don’t include your state’s requirements, don’t address your business model, and haven’t been updated in years.
How to avoid it: Every business relationship involving money needs a written agreement. Period. A one-page document clearly stating who’s doing what, when, payment terms, and what happens if things go wrong beats nothing every time.
Invest in attorney-drafted templates for your common scenarios: client agreements, vendor contracts, independent contractor agreements, partnership terms. Costs $500-$2,000 upfront but you’ll use them for years.
Never leave these terms vague: scope of work, payment schedule, deadlines, ownership (especially intellectual property), and termination rights.
The Registered Agent Problem
The mistake: Not maintaining a proper registered agent or failing to update your address.
The cost: Miss legal notices because your registered agent information is wrong, and you face default judgments, tax penalties, or administrative dissolution. Reinstatement runs $200-$500.
Your registered agent is how the state and legal system contact your business for official matters. Wrong address means you miss critical tax notices, legal summons, and compliance deadlines.
How to avoid it: Use a registered agent service and pay the annual fee, or if serving as your own agent, update your address with the state immediately when you move. Check your state’s business registry online quarterly—takes five minutes.
The “I’ll Do It Later” Tax
These mistakes share one thing: they’re boring tasks pushed to the bottom of the list. Something’s always more urgent or interesting.
But these $500+ mistakes add up fast, accompanied by stress, embarrassment, and time fixing problems that shouldn’t exist.
If you’re thinking about selling your business someday, remember: every dollar of lost EBITDA reduces your business value by some multiple of EBITDA. Waste $2,000 annually on avoidable mistakes at a 3x multiple? That’s $6,000 off your sale price. At 5x, it’s $10,000. Small mistakes compound into real value destruction.
The good news? These are the easiest business problems to solve. You don’t need specialized expertise or capital. You need systems.
Block two hours next week to audit your compliance. Pull your formation documents, check license status, review policies, verify state filings are current. Set up calendar reminders to keep you out of trouble.
Your future self—and your bank account—will thank you.