5 THINGS ALL BUSINESS OWNERS NEED TO KNOW.
AN ARTICLE DEDICATED TO ASSISTING BUSINESS OWNERS IN PROTECTING THEIR PERSONAL AND BUSINESS INTERESTS.
In today’s time, more and more people are understanding the opportunity that lies within them. And with this, more and more people are deciding on entrepreneurship than working for other businesses. The problem is most entrepreneurs do not understand the key importance of running a business and the ever-lurking legal issues that loom in the background.
In this article you will learn about five key aspects that all business owners or entrepreneurs should know or think about when they create a new business.
Let me also add that this article is not to be a substitute for legal advice. If there is an area that you are unsure of or need further guidance on, it is always best practices to engage legal counsel to ensure that you are making the right decision for you and your business.
PROPERLY & LEGALLY SETUP
Is your business incorporated?
One key aspect of insuring a business is properly protected is ensuring that it is properly and legally set up. What does that mean? If you’re an entrepreneur, you may very well think that it’s okay to only be a sole proprietor meaning you have not legally incorporated your business. That would be a huge mistake.
What is incorporation? Incorporation is the legal registration of a company, partnership or corporation with the State in which you plan to operate and do business in.
When you create a business, you create tangible and intangible property that is undoubtedly a huge asset to your business. With those assets, you want to ensure that they are protected. For example, as an entrepreneur has created a business; thus, has also created a business name, logo, website, and much more. Without incorporating your business name, you are leaving yourself vulnerable to other people or companies who may be able to use that name and sue you later for trademark infringement.
Furthermore, without incorporating, you are leaving yourself personally vulnerable to any suits that may arise from the business that you are running. What that means is, without setting up a legally recognizable company, you will be personally attacked as the person behind the business, instead of the business itself because there has not been a clear distinction between you or the business.
On the contrary, when you fail to incorporate your business, you will not be able to take part in using deductions for the business because you will not have a legally recognizable business. If you are a sole proprietor, you’re simply filing taxes as an individual, using any exemptions allowed by the government, and only deducting on a personal basis. This could cause a larger tax penalty to you without the benefit of claiming business deductions also.
Therefore, incorporating your business is always an important first step. If you need information on the different types of business entities, click here.
Aside from incorporating your business, the law also requires different formalities to be adhered to based on the type of business entity that you’ve chosen. For example, with some corporations such as a limited liability company or nonprofit organization, you are required to hold meetings.
Some general requirements are to hold board meetings, successive meetings, pay taxes, adhere to professional licensing regulations (if that applies), follow the law of securities, maintaining your registration with the state, keeping meeting minutes and detailed company records.
When a business owner fails to adhere to its entity’s formalities, it could subject you to personal liability and/or the threat of losing your corporate status.
You should consult an attorney to explain the law in your state to determine what's expected of your particular business entity to maintain compliance.
Have you engaged any insurance policies for your business?
You may think that having business insurance is a waste of money especially if you're not working out of a physical location. You're wrong! Business insurance is very important and is an investment just like health insurance. You pay for health insurance every year and you may not even need to see a physician, right?
Business insurance works the same way. It's a tool that's setup to financially protect you if you, the product or services your company is providing ever caused harm to a consumer, a partner, or potential customer. Investing that capital for insurance may very well save you in having to pay large damage sums out of your personal banking accounts or through any valuable assets you own.
Some business insurance policies will even provide legal counsel if there is a lawsuit filed. That’s huge! If you are a small business owner, you may not be able to afford large retainer fees if litigation occurred. Therefore, it's a great plan to invest in your business in the things that could save you in the long run.
Are you making deals?
Have you made deals just on a “word” alone or a handshake? You need more! We all know how hard it is to have friends and family sign contracts when we want them involved in our businesses. However, failing to put written agreements in place will leave you vulnerable regardless of who the individual is you decide to do business with.
Although oral contracts are legal, it boils down to a “he-said, she-said” argument if it ever went to litigation. Whereas, if the contract is in writing, the Court may give more deference to the written agreement especially if the parties to the agreement have acted based on the terms of that agreement. Making sure your written agreement is in place, gives you more recourse to seek damages against someone who breaches the terms set forth.
There are many types of contracts that business owners may need and should possibly consider during the operation of their business. These types include the following: partnership agreements, shareholder agreements, privacy and terms of services, investor agreements, confidentiality and non-disclosure agreements, vendor agreements, speaking agreements, referral agreements, purchase order agreements, employment agreements and more. You should seek counsel to determine the proper agreement necessary to accomplish the goals you have in mind.
You have it, you just don't know you have it.
Many small businesses or entrepreneurs do not realize that they have created intellectual property. For instance, if you have a business name, website, logo, and tagline, you've created intellectual property.
Now, here's the larger question: Have you protected it? If you have not registered your business name, trademarked that name, logo and tagline, then your property may be vulnerable to use by someone else. Whoever files first, get the right to use and market the name. All others will be infringers which could carry a heavy penalty if a suit is filed in court.
Do not go another day without registering, trademarking or filling a copywrite for the intellectual property you have created. You've spent countless of hours on your business and getting it to a place that you can be proud of so, PROTECT IT!
You may always schedule an appointment with the SL DeBarros Law Firm, LLC to discuss your intellectual property and get you on a plan to protect what you’ve created.
What happens later?
Now that you've set up your business properly, have followed legal formalities, have protected your intellectual property, have you put together a plan for what happens to all of your hard work once you become incapacitated or after death?
So many people do not think about their own will or power of attorney, let-a-lone a business succession plan. For some reason, we all think that we're immortal and somehow, we'll be around forever. That's not true or logical.
Your business and the interests you've created need a place or person to handle them when you're unable, regardless of whether your absence is temporary or permanent. When you make a succession plan, you're assuring yourself that your business will be maintained properly because you will be the one to appoint those who you feel can carry on in an effective manner. Failure do plan for succession, could have your business and its assets wrapped up in probate litigation, something that no-one wants.
If you do not have a business succession plan, contact the SL DeBarros Law Firm today. Your business is not too small or too large to start protecting the property and business interests you’ve created during incapacitation or after death.
You always must be mindful of different things that may or will occur that could greatly impact you or your business. If you do not have in-house counsel or an attorney you can consult with, you may want to consult with one because you simply “don’t know what you don’t know.” It’s thrilling to start your own business and feel that you are succeeding at it. But, it’s also shocking and freighting when a legal issue surfaces that could potentially threatened the entire framework of the business you built.
Moving forward, let’s make sure you’ve put the proper channels in place to protect yourself and your business.