By Richard Weintraub
Running a business requires making many decisions, and relying on long-standing legal myths to guide those choices can increase your risk of legal conflict. With that in mind, I wanted to share four common misconceptions I encounter regularly, along with the facts business owners should know to better protect their companies.
- “Verbal agreements do not count.”
In many cases, they do. Verbal agreements can be as enforceable as written agreements if they meet the same legal requirements, including mutual consent, lawful subject matter, consideration (something of value exchanged, such as money, services, or promises), and clearly defined terms. The real issue is that they are much harder to prove.
Without a written record, it often becomes one party’s word against the other’s. And for certain types of contracts, such as those involving real estate or long-term commitments, written documentation is required by law.
Key takeaway: Verbal agreements can carry legal weight, but without written proof, enforcing them is risky.
- “If it is in writing, it is automatically enforceable.”
While a written agreement is a good starting point, it must meet certain legal criteria to be considered valid, such as mutual consent, lawful subject matter, consideration (something of value exchanged, like money, services, or promises), and clearly defined terms. However, California has statutes addressing written communications as written contracts, such as an email string.
This issue often comes up in everyday business documents like vendor agreements, independent contractor agreements, employee contracts, and even partnership arrangements.
In some cases, even a signed document may be unenforceable if it is vague or uses ambiguous terms, is missing key elements, or violates public policy.
Key takeaway: A written contract helps, but enforceability depends on content, clarity, and compliance with contract law.
- “You do not need a lawyer unless you are being sued.”
Legal guidance is not only important when legal issues arise — it is essential to have dedicated preventive legal guidance as well. Preventive legal support can help you structure your business correctly, draft enforceable contracts, stay compliant, and avoid disputes altogether.
Waiting until you are facing litigation often limits your options and increases your costs.
Key takeaway: Think of preventive legal counsel as a risk management tool, not just a crisis response.
- “An LLC always protects your personal assets.”
Forming a limited liability company (LLC) can provide a layer of personal protection, but the protection that an LLC provides is not absolute. If you commingle personal and business finances, fail to follow proper procedures (such as not keeping separate bank accounts and having inaccurate records), or engage in misconduct, a court may “pierce the corporate veil” and hold you personally liable.
Key takeaway: Liability protection depends not only on structure but on how well that structure is maintained.
If you are unsure whether your current agreements or business practices provide the protection you need, I would be happy to talk it through with you. Please feel free to reach out with questions or to schedule a consultation.
This article was written by an independent third party. It is provided for informational and educational purposes only. The views and opinions expressed herein may not be those of Guardian Life Insurance Company of America (Guardian) or any of its subsidiaries of affiliates. Guardian does not verify and does not guarantee the accuracy or completeness of the information or opinions presented herein. | Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Diversification does not guarantee profit or protect against market loss. This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity.
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