So you’re sitting around thinking about starting your own business, but you realize you have no idea how to do it. Most people are not lawyers, but unfortunately, even as a non-lawyer you’re still going to have to deal with the law as a business owner. So as you prepare to take that imperative step from just having an idea to actually implementing that idea and turning it into a thriving business, you will have to think about the legal considerations of starting a business. This article seeks to educate you about some of the key steps and legal issues you have to consider before starting your business.
1. Check All Aspects of Your Business Name
Many of us like to jump the gun on choosing the perfect name for our business. Picking a name is not just about what sounds or looks the best, but rather, what is feasible and most of all, what is legal. Before choosing your name, you want to make sure it is available and not being used or trademarked by another company. Perform a trademark search of the name with the United States Patent & Trademark Office to make sure you are not infringing on someone else’s trademark, which could lead to a lawsuit (trademark searches can be conducted by clicking this link – http://www.uspto.gov/trademarks/.
There are other important considerations when naming your business too. If you find out that the perfect name’s URL (web address) is already taken by someone else, you might have to buy that domain name for a high price, if it is even for sale, which is not likely feasible for a new business. So when you are picking a name, it’s advisable to use one that has an available domain name. There are search engines to help you find an available name such as www.BustaName.com. While you’re at it, check Facebook, Twitter, Instagram and any other social network or medium you might use to promote your business and make sure the name is available there too. You never know who might be using your proposed business name, and in what way, until you look, so search everywhere.
2. Determine Your Goals
You need sit down and have a serious discussion, either with yourself or with your partner if you have one, about the goals of your business and how you want your company to be run. Each business comes with its own unique set of legal issues. For instance, a gift-wrapping business is likely going to be a lifestyle business, whereas a tech company is more likely tailored for high-growth and an IPO or acquisition by Google or Apple. Those distinctions matter not just for logistical reasons, but for legal reasons as well. For example, a gift wrapping business likely won’t come with much intellectual property that needs to be protected, whereas most tech companies have a substantial amount of IP, and IP always comes with legal considerations. Here’s more information on how to protect your intellectual property.
Other questions to consider are whether the business will be self-funded or if you need to raise venture capital or take out a convertible note to pay for operations. These things are imperative in deciding whether to form your business as a Sole Proprietorship, Partnership, LLC, Non-Profit, Corporation or another kind of entity. The decision of what entity to form will have drastic consequences on what tax rate you pay, the personal liability you assume, and how much “red tape” you must deal with in your own company when making decisions. This is often not something you should decide alone, which is where the next section about hiring a lawyer comes into play.
3. Find a Lawyer
Most people think they can form their company by themselves, and they can, but these people often do not understand the implications of making a decision one way or another. That’s why one of the best pieces of advice when starting a business is to hire a lawyer!
The reasons are numerous. You should read about starting a company without a lawyer to understand what can go wrong if you choose to go it on your own. It follows the standard phrase in law that “it takes ten times more effort to fix something than to do it right the first time.” And let me tell you, “effort” translates to tons and tons of money in the legal profession. So it’s best if you do right the first time, and hire a lawyer because it’s important for your startup to have adequate legal protection.
4. Know the Regulations, Licenses, and Taxes
This is where a lawyer can help, but is not imperative. If you are starting a business in an environment that is highly regulated, such as a food company, you need to take this into consideration because the costs will be exponentially higher than with the gift-wrapping business suggested earlier. Check local, state, and federal regulations because those alone might make the business unaffordable. There might be food permits, manufacturing licenses, FDA (Food and Drug Administration) approval processes which take lots of money, etc. Make sure you know all of these before you start you business not only for budgeting reasons but also so you don’t ignore a regulation and get punished down the road.
Starting a business can be a daunting task. Make sure you focus on what you do best, which is the business. Let the lawyers deal with the law. But make sure not to overlook the importance of establishing your company correctly from the start. It will pay dividends down the road.