Having sound legal advice is always a good idea for any business owner, but perhaps even more critical for an entrepreneur who is starting and growing a new business.
As seen in the recent post, From Wantrepreneur to Entrepreneur: The Essential To-Do List, having a sound team of professional advisors around you is essential as you decide what type of business to build and how to structure it.
1. What Is the Right Structure for My Business?
There are several key considerations when deciding which business structure is appropriate for your company. The simplest option is to operate as a sole proprietor, which is the most common structure in the United States; however, you absorb all liability risk and are financially accountable for lawsuits and debts.
Other structures such as corporations and limited liability companies and partnerships make more sense to reduce personal liability, determine tax obligations, and include partners and shareholders.
It is wise to have a conversation with legal and business partners to get a firm grasp of the specific complexities of each option as it applies to your situation.
2. How Do I Protect My Intellectual Property?
Products, processes, and inventions are all types of intellectual property that need to be legally protected. Attorneys can help identify which of your assets are intellectual property and show you how to protect them. This applies to other items, such as your business name, logo, slogans, and even your packaging. It is always wise to get legal counsel to help in registering trademarks, copyrights, and patents and to ensure that you are not infringing on others’ assets, and that your assets are protected.
3. How Can I Reduce Risk?
While this might seem like a question to ask an insurance agent, it is also appropriate to ask your attorney. Companies face many different legal exposures.
Perhaps the most common is legal pitfall centers on employment. Companies must comply with state, local, and federal guidelines regarding wages, other forms of compensation, hours worked, tax withholdings, and workplace conditions. Business owners also need to be aware of different anti-discrimination and harassment laws. Having detailed policies, handbooks, and ongoing training can help companies avoid costly fines and penalties for noncompliance.
4. Do I Need Contracts?
The short answer is "yes." When you sign a lease, purchase equipment, become a franchisee, enter into a partnership, or negotiate sales terms, you will need contracts that specify the terms, prices, conditions, obligations, and consequences of a breach of contract for each party. Contracts offer extensive legal protections and should be reviewed by your attorney before signing.
5. Do I Need Licenses?
The types of licenses and certifications you will need will depend on the type of business you have, the industry you are in, and where you are located. Some businesses require licenses to operate from state and local agencies that need to be displayed prominently in your physical location.
Once the Legalities Are Handled
After you have ascertained what you need to do to meet legal requirements for your business, there is still the matter of funding to consider.
Benetrends has been helping small businesses find the right funding for decades. Our innovative business structure solution helps entrepreneurs tap into existing 401(k) or IRA plans to finance start-up or expansion costs. To learn more about our 401(k) funding strategy, download The Definitive Guide To 401(k)/ROBS Business Funding.