Big Mistakes Small Businesses Make—And How CPAs Can Help Spot Growth Opportunities

Why CPAs Are Critical Advisors

For small and mid-sized businesses, a certified public accountant (CPA) does far more than balance the books. CPAs are uniquely positioned to spot operational weaknesses, compliance risks, and inefficiencies that can undermine growth or lower company value. By guiding clients to address these issues proactively, CPAs play a critical role in protecting long-term success.

Below are some of the most common mistakes small businesses make—and how CPAs can help identify and prevent them.

Handshake Agreements

Too many businesses rely on verbal agreements instead of written contracts.

Risks: Misunderstandings, disputes, and lack of enforceability in court.

Example: A client entered into a verbal supply deal. When the supplier failed to deliver, there was no written contract to enforce, leading to financial losses.

How CPAs Can Help: Encourage clients to formalize agreements and stress the financial risks of informal arrangements.

Failing to Make Annual State Filings

Missing annual state filings can threaten a business's very existence.

Risks: Penalties, administrative dissolution, and loss of liability protection.

Example: A client skipped an annual report filing, causing the state to dissolve the LLC and complicating financing.

How CPAs Can Help: Provide filing reminders and integrate compliance tracking into client advisory services.

Poorly Documented Owner Relationships

Without formal agreements between owners, conflicts are inevitable.

Risks: Disputes over profit distribution, voting rights, and succession planning.

Example: Co-founders without a shareholder agreement clashed over valuation during an exit, leading to costly litigation.

How CPAs Can Help: Highlight risks in governance gaps and recommend drafting operating or shareholder agreements.

Granting Too Much Power to Non-Owners

Unchecked authority in the hands of managers or employees can jeopardize company stability.

Risks: Mismanagement, poor financial decisions, and lack of accountability.

Example: A senior manager was given unrestricted control over finances, resulting in major losses.

How CPAs Can Help: Recommend governance structures that balance operational control with accountability.

Non-Compliance With Laws

Failure to follow tax, labor, or industry-specific regulations can destroy business value.

Risks: Fines, lawsuits, reputational harm, and buyer hesitation during due diligence.

Example: A client misclassified employees as contractors, leading to lawsuits and penalties.

How CPAs Can Help: Advise clients to schedule legal audits, identify compliance gaps, and partner with legal counsel to resolve risks.

How CPAs Unlock Growth Opportunities

Beyond compliance, CPAs can help clients increase business value and stability by:

By serving as a proactive advisor, you not only protect your clients' businesses but also strengthen your role as a trusted partner in their growth journey.

Supporting Your Clients With GNS Law

Small business mistakes can significantly impair growth and valuation, but CPAs are uniquely positioned to help clients avoid them. By spotting risks early and directing clients to legal support, you can safeguard their operations and reinforce your value as an advisor.

At GNS Law, we partner with CPAs to provide clients with legal strategies in business formation, compliance, contract drafting, dispute resolution, and governance. GNS Law is the national law firm for entrepreneurs who want to start, scale, and sell their businesses, and we are committed to helping you and your clients build stronger, more resilient companies. Contact us today to learn how we can support your clients' success.