When you head down the road to entrepreneurship, you become the captain of your own ship, the CEO, the BOSS. Your entrepreneurial spirit is a key component to taking that first step in the direction of your dreams. But before you launch your ship you need to make sure that the gas tank is full, and you have all the provisions you need for a successful journey. Already launched? You still have time to make course corrections! So get these keys in place to ensure that your small business is legally sound.
Key One – Choose Your Business Entity
The first key to launching a legally sound business is to choose your business entity. In the business world, the business entity is your boat, the container that holds your company. For small business owners, there are two primary reasons to set up a business entity: (1) to protect your personal assets and (2) to minimize your tax liability.
So what entity should you choose? The difference between a sole proprietorship, partnership, LLC, or C Corp can affect the trajectory and growth opportunities for your business. The choice should align with your business goals and objectives. Is it going to be just you, or are you planning to scale up and franchise in the future? Are you self-funding or will you need venture capital? Your intended size and scope matters. Talk to your accountant and your attorney about which entity is right for you!
Key Two – Don’t Go It Alone!
The second key to launching a legally sound business – don’t go it alone! Many entrepreneurs make the mistake of thinking they can (or have to) do EVERYTHING themselves. As the captain of your ship, you need a crew to help you on your journey. Your crew will fill the gaps for the skills you don’t have, or the tasks you simply don’t have the time to handle. For example, it may be more efficient to outsource your bookkeeping or your social media management. This allows you to spend your time on your income producing activity.
Unless you have the training or specialized knowledge there are four areas where you should definitely have a member on your crew advising you. These are legal, insurance, finances, and taxes. In each of these areas, an innocent mistake could sink your ship and wipe out everything you have worked so hard to build. Having these professionals on your crew can help you mitigate risk and avoid trouble!
Key Three – Use Contracts
The third key to launching a legally sound business is to use Contracts. Of course, you CAN run your business on handshake and verbal agreements. People have been doing it for thousands of years. Unfortunately, using a poorly drafted contract, or no contract at all, can leave you exposed to legal risks that are easily avoidable. Operating with solid business contracts provides you with the opportunity to resolve issues before they even arise! Use contracts in your business to set expectations between the parties, define business terms, and provide legal protections.
Key Four – Compliance
The fourth key to launching a legally sound business is to have plans for compliance through business Policies and Operating Procedures. You may be surprised to learn that you are never too small to need policies for your business! Most of the policies you will establish for your business are driven by the need to comply with statutes, rules and regulations. Have a website? You need to comply with GDPR and CCPA. Have an email marketing list? You need to comply with the CAN-SPAM Act. Employees? There are a host of laws and regulations on that! There are also industry specific regulations to consider. If this all sounds daunting or scary, just know that your small business attorney can answer questions about what regulations are applicable to YOUR business. You don’t have to figure this all out on your own!
Key Five – Protect Your Intellectual Property
The fifth key to launching a legally sound business is respecting Intellectual Property rights. When it comes to Intellectual Property, entrepreneurs may unknowingly be infringing the IP of others, or failing to protect their own IP. From the trademark on your business name to the copyright registration of your book or course or blog posts, your intellectual property assets are important part of your business that deserves protection! If you haven’t had a professional trademark clearance search done before you started using your brand elements, you may be unknowingly infringing on someone else’s registered mark. You don’t want spend a lot of money on your brand identity – logo, website, business cards – only to have to start over because you receive a Cease & Desist letter from an owner whose mark you’ve infringed. So get the clearance search done before you get your design work done.
Once you’ve cleared your brand identity and started using it, take the steps to protect it! Did you know you can use the TM symbol on your mark even if you haven’t filed an application with the USPTO? Use the TM symbol to designate the marks you consider your IP as soon as you start using them in commerce. Then discuss registering your trademark with the USPTO with an attorney.
Making sure these five keys are in place positions your business for smooth sailing and a successful journey!
