Starting a business is like falling in love. You’re enamored with your idea and believe everyone will love it as much as you do.
Yet the entrepreneurial fire in the belly that wakes you up at 3 a.m. so you don’t forget the brilliant idea you just had is the same enthusiasm that creates business blind spots. We’re so eager to set the world on fire, to become the next Facebook, Apple, or Google, that it’s easy to gloss over pesky details that aren’t as much fun.
It always amazes me when people tell me they have no legal concerns because they’re just starting their business. Do they mean they haven’t been sued yet? Do they mean they’ve anticipated and thought through every possible legal issue as part of their business plan?
Or are they just unaware that the business venture they are about to embark on is played on a legal field with hard foul lines and unforgiving rules?
We often don’t know we don’t know. So today I’d like to devote this space to giving you the 10,000 foot view of the base lines. I’ve also included lots of links to other resources I’ve created here on AllBusiness.com so you have the flexibility to dive deeper into areas of concern.
1. Business Organization
Every business faces legal issues surrounding its organization or creation. A business is either a proprietorship (see article/ video), a partnership (see article/ video) , or some type of corporate form (see article/ video).
There is no one-size-fits-all answer as to which form best. There are pros and cons associated with each of them (hear podcast) and the one that’s best for you will be determined by a number of factors (hear podcast). The most important of these could be whether you need to protect your personal assets. If you do, a proprietorship is probably not for you.
Your personal tax situation is another huge factor, which is why your tax advisor can help you sort through the different options and help you to decide whether incorporating is right for you.
2. Business Permits and Licenses
The form of organization, however, only gets you part way there. Business permits and licenses are what give you the freedom to operate legally. They're the equivalent of a certificate of occupancy (“CO”) for a new house. You can’t move into a new construction without a CO, and you can’t legally operate your business without the appropriate permits and licenses (hear podcast).
Even a home-based business operating from a kitchen table usually needs a permit.
The form of organization and permits and licenses are typically one time start-up questions that you won't need to revisit very often, except to the extent that some may require paying annual renewal fees.
3. Operational Issues
Every business, regardless of organizational form, has ongoing legal operational issues. If you engage in transaction you have contract issues. If you have employees you have employment issues. If you have information you don’t want shared with competitors you have confidentiality and trade secret issues. If you want to protect your product and/or your brand you may have trademark, copyright, or patent issues . . . and the list goes on.
Form contracts and operational policies can go a long way to controlling those risks and avoiding predictable surprises. But periodic legal health check-ups and being aware of when and how legal risk arise the best ways to make sure you don’t get blindsided as your business grows.
No comments:
Post a Comment