Don’t let your entrepreneural passion cause you to cut legal corners without knowing it. If you’re running a startup, check out these business law tips.
If you’re looking to join one of the approximate eight million people who are self-employed, kudos to you for taking that leap. You’re finally achieving your dreams and launching your startup.
Don’t get too excited yet, though. There are still some boring legal matters to take care of before you can officially start doing business.
Here are some of the most essential business law tips that you should be aware of when starting your startup:
Unfortunately, you can’t always get away with owning a business without filling out paperwork for your state. Depending on what business path you choose, you may be required to register your business with the state so the proper financial measures and employment laws can be accounted for.
Selecting the correct type of incorporation for your business is essential. Here’s a list of different ways you can legitimize your business:
If you’re the only one operating your startup, a sole proprietorship is the best route. It’s simple to become a sole proprietor–you don’t have to go through a bunch of legal paperwork for the government. Just don’t forget to get a federal employer identification number (EIN) when you decide to hire employees.
The main downside to owning a sole proprietorship is the fact that none of your personal assets will be protected. When your company gets sued, your personal belongings can be used to pay a settlement.
An LLC is legally separate from its owner. You’re required to go through the process of obtaining a tax identification number, as well as get a separate bank account for your business.
This is where LLC’s come in handy–if your business gets sued or goes bankrupt, you won’t have to sacrifice your own personal assets to pay any debts.
The process of forming a partnership is similar to that of a sole proprietorship. The only difference is that a partnership is formed with at least two people instead of one. Like a sole proprietorship, the owners of the business will be putting their personal assets at risk if they go bankrupt or get sued.
Establishing a corporation takes a lot of time and money. When your business is just a startup and you’re trying to save your money, it might not be a good idea to form a corporation right away.
The owners of a corporation are legally protected from having their personal assets used to pay any fees. Unlike LLCs, corporations are owned by several shareholders.
This is one of the startup tips that you shouldn’t ignore. If you don’t want anyone copying your logo or company name, you’ll need a trademark. Trademarks are defined as a name, word, or symbol that represents your business.
You’re not legally required to register a trademark, but it’s highly recommended. You don’t want any other businesses encroaching on your profits, right? Any other companies that use a logo similar to yours and claim to be associated with your company can be sued as long as you have a trademark.
Navigating startup law can be very complex. If you try to do it yourself, you might do something seriously wrong–legal issues could land you in deep trouble and result in you having to learn more about bail bonds.
Having the assistance of legal services for startups when creating patents, establishing trademarks, and forming your business can be a huge help. It’s better to get a lawyer who specializes in the area you’re stuck on. For example, if you need help with patent, get a patent attorney who can guide you through the process.
One of the best pieces of startup advice is to create an operating agreement. You should always get an operating agreement in place before you start doing serious business.
The purpose of writing an operating agreement is to officially assign the roles and contributions of the business owners. This way, there will be no arguments or ambiguities if something happens to one of the business owners. It doesn’t matter whether or not you’re the only owner of the business either–operating agreements help you clarify policies so you don’t get confused in the future.
Right now, you’re probably looking for people who can help contribute to your startup. These people can be designers, writers, accountants and more. You’ll need to determine whether to consider them employees or independent contractors.
Independent contractors are defined differently from regular workers–they don’t get told what to do and how to do it. Drawing the line between the two types of workers means creating policies.
Make sure that your contract clearly states that the independent contractor you’re hiring is not to be considered an employee.
You might need a permit depending on what type of business you’re running. For instance, if you plan on having a physical location for your business you may need a zoning permit.
Similarly, you’ll need a health permit if your startup involves food sales or beauty services.
Other types of permits exist as well, but you should check with your state government to see if there are any requirements for your business.
Are you ready to start hiring employees? Bringing employees on board comes with rules and regulations that you need to follow.
In addition to creating an employee handbook, you’ll need to research things like worker’s compensation and wage requirements. If that doesn’t sound complicated enough, you also will be responsible for knowing about health insurance, payroll, tax withholding, and OSHA policies.
There’s always a learning curve when it comes to figuring out all the legal stuff for your business–complicated legal jargon and confusing business law policies can make any non-law student confused. Reading legal requirements may make your head spin, but it’s necessary to know when you’re starting up a business. The next time your startup is ready to make its next big step, make sure that you’re in accordance with the law.
Looking for more business advice? Find more articles on our money and finance blog for entrepreneurs.