Getting all these structures put in place for your business will definitely take quite some resources, but they are however important if you want to head off potential future headaches for you and your business.
Starting a new business can often place quite a number of responsibilities on your shoulder some of which include managing employees, dealing with customers, building and growing your brand, and much more. This can, of course, be quite a challenging time for a new business owner. However, with all these things that the business owner has to deal with, one thing that has the potential to cripple the entire business if not properly dealt with is legal issues.
The complexity of the law, the relatively little knowledge that laypeople have about the law and the high cost of hiring business lawyers are some of the reasons why business owners and most people, in general, like to keep lawyers at arm’s length, except only when they are absolutely needed.
Having said that, there are some aspects of starting or running a business that if not handled properly will not only necessitate you needing to get a lot of lawyer time, but it could very easily spell doom for your business later on.
Here are 5 of the most important legal things you should get done in the early days of your business.
1. Choose Which Business Entity Will Work Best For You
If your business is a small one run by just you and you do not have any employees or you don’t do a large volume of business or have a lot of customers, running a sole proprietorship may be a viable option. If, on the other hand, you have or plan to hire employees, or your business has several owners or does a sizable volume of business, then it is important that you run your business under an appropriate business entity separate from you, such as an LLC or Corporation, in order to protect you from being personally responsible for the mistakes, debts, lawsuits and other such undesirable situations that the business may find itself in at some point in the future.
Doing this will also help to get your company ready for any possible challenges it might face in the future, such as facing bankruptcy.
2. Draw up a Solid Business Formation Contract
It is critically important that your business or company’s foundation is well-grounded on a solid contract or other legal documents that legally recognizes its formation and existence whatever type of entity it is, be it a sole proprietorship, partnership, not-for-profit, LLC or a Corporation. A properly written contract of formation document, which should preferably be drawn up by a contract attorney, is essential to help prevent certain issues with the business that may crop up in the future, or ensuring that if or when those issues do arise there is a clear path and guideline on how to resolve them.
This is perhaps especially relevant to partnerships, who can often have disagreements, but with no clear way on how to resolve them. Some examples of such documents include Articles of Organization or Incorporation, Certificate of Authority, Operating Agreement, EIN Confirmation Letter and more.
3. Get Your Business, Domain, Product Name Checked
Even if you do not yet have the money to register a trademark, you need to be sure that you are not infringing on another person’s registered trademark. You should, therefore, be sure to perform a search for any existing registered trademarks at the database of the trademark office and also use Google to look out for common usages of the name you want to use for your business or product.
Doing this can potentially prevent you from having to be involved in litigation in the future, something which can be very expensive for your business.
4. Get a Business Licence
While not every business requires a license to operate, there are some types of businesses that do. It is important, therefore, to do the needed research beforehand to determine if and/or what kind of license your business might need and to get these licenses before the business becomes operational. Failure to do this can often have consequences either for the business or for you personally, or in some cases, both you and the business.
5. Get Your Business Financials Done
It is important to put a number of basic financial systems in place even if you are starting very small. This will help you to keep track of your income, expenses and other business financials for the purpose of planning and taxes. It is also important that you make sure to keep your business and personal accounts separate so as not to risk the possibility of the corporate veil being pierced, should such a situation arise.
A good bookkeeping system for your business will help to keep separate your business and personal money. If you have employed workers, you then obviously need to have a payroll system like Gusto or QuickBooks to help you make calculations and fill out forms correctly.
Getting all these structures put in place for your business will definitely take quite some resources, but they are however important if you want to head off potential future headaches for you and your business.
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