So you have an amazing idea for a business…
But starting a business can be a very risky venture.
The more you plan and strategize before you start your business, the more likely you will be able to succeed.
Here are the 5 top questions to ask a business lawyer before starting a business.
Before you start your business, make sure yourself you ask the following…
If you have any other questions about starting and growing your business, email me at sam@mollaeilaw.com
Question #1: “Which Business Structure Should I Choose?”
Understanding the different business structures is crucial for you to decide which one suit you best.
Each business type has specific details unique to it that may or may not benefit you depending on the strengths and weaknesses of your prospect business…
ANSWER: Determine which business structure is right for you.
Sole Proprietorship
The sole proprietorship is the number one candidate for entrepreneurs who are more comfortable with working alone. From the phrase itself, it is easy to derive that the owner of the business is just one person who is most likely to be the manager as well.
Forget about much fuss of starting a business because there is almost zero paperwork involved here. All you have to do is to prepare the needed requisites to run a business and you can start it right away.
In sole proprietorship, the sole owner risks his personal assets, and may be taken away from him in cases of business’ debts or legal complaints.
Partnership
The partnership on the other hand is almost the same as the sole proprietorship except for the fact that there are more people involved. The partnership member’s ownership does need to be in the monetary form. You can be a partner even if your contribution to the business is your ability to work as the administrator.
The owners under this kind of structure are also exposing their personal assets to risk for the same reason. When choosing this kind of structure, it is always advisable to have a partnership agreement to make sure that you have your understanding and rules on how to deal with possible future situations.
A small business attorney is a big help on this regard because he can simplify things for all of you and prevent any misunderstanding that may arise while settling the contents of the agreement.
Corporation
Unlike the first two, a corporation means that your business will exist as another entity of its own that is allowed by the law to earn profit and sell shares.
As a result, the owners have a lower level of liability under this structure. Whatever losses suffered by the business will be the loss of the business alone because it is a separate entity.
The debts will not be transferred to the owners and your personal assets are safe from the embargo.
This, however, needs a ton of paperwork and other things such as regular meetings, filing of annual reports, board of directors to manage the business, and more. In addition to that, double taxation is applied here.
LLC
Limited Liability Company (LLC) is somewhat a combination of features and benefits of partnership and corporation.
Entrepreneurs who opt for this structure do not need to worry that their personal assets will be in peril if ever the business was not able to meet the financial obligations expected from it. Your losses are limited to your investment in the business.
Non-Profit Organization
The other one is the non-profit organization that is formed mainly to help people or contribute to a greater good. What is the best feature of this? It is tax-free! However, do not just jump right into this because there are strict regulations that you must keep in mind here.
Tax-exemption is only granted if the entity is indentified as beneficial to the public, or in a way is helping the people for a definite cause. Be mindful that all of these have their specific taxation rules that apply to each and is affected by the laws of the state.
Question #2: “How Do I Limit My Personal Liability?”
Entering the business field itself is a risk as you are investing not only money but your hope and emotions in wishing that it will succeed.
How many stories are there where people’s asset has been seized by banks because of failure in business?
You do not want this to happen to you right?
As such, it is only fitting that you should find ways on how to limit your liability in doing your business. Doing so will help make sure that your personal properties are fine even after your business goes under.
ANSWER: Form an LLC or Corporation
How to Form an LLC
The name itself suggests that the owners have limited liability concerning the business’ financial obligations. The owner could be one or more, but unlike in sole proprietorship and partnership, their interest is protected.
The LLC also provides different options in estate and tax planning. Many of the states implement the Revised Uniform Partnership Act that prevents the personal creditors of the owners of the LLC from charging an order that will force them to foreclose and liquidate the business. This is a rule that is never experienced even by corporation owners.
Forming an LLC is not as complicated as some are inclined to think. The following sums up the steps that you should do to form one.
- Decide on an available name for your business that is according to the rules of your state.
- Organize and file the paperwork needed that is referred to as the articles of organization that may cost about $100 to $800 depending on the state.
- Make sure that the rights and obligations of each member of the LCC are clearly stated in the operating agreement.
- Some states require publishing a notice of intent to form a business structure called LLC.
- Get the necessary permits and licenses required for the formation of your business.
How to Form a Corporation
The corporation has features that also protect the owners from the business’ debts. This structure also allows the issuance of shares that may help the business to grow or have more investors.
Moreover, income splitting of the business is available to lower the tax. It has a more complicated paperwork and structure but its formation is manageable if you know what to do. Except for some additional tasks, its formation has some similarities with that of the LLC. Listed below are the things that you should do.
- Like in the LLC, choosing an available name for your business is important.
- There should be initial appointed directors.
- File and settle the fees for the formal paperwork of the incorporation.
- Form the bylaws of the corporation that will detail how it will operate.
- Give the shareholders their stock certificates for the corporation.
- Get the necessary permits and licenses for your business.
Question #3: “What Contracts Does My Business Need?”
The contracts you need may vary depending on its type of structure. However, there are common contracts needed by small businesses that could be drafted with the help of a business lawyer.
ANSWER: Ask a business lawyer to help you determine which contracts your business needs.
Non-Disclosure Agreement or the Confidentiality Agreement
Keeping the proprietary information within the bounds of your business is important to make sure that business’ interest is protected. This applies not only to the employees but to all people who have significant involvement with the business like the individual contractors.
The strategies that you brainstormed during a meeting could be the key to your success and it may be jeopardized when rivals become aware of it.
To prevent such things from happening, you need a confidentiality agreement that clearly states the things that you want to be confidential are and how it will be dealt with.
Independent Contractor Agreement
Independent Contractor Agreement provides the details between you or the business and the individual contractor. The latter is not considered an employee thus, you do not need to worry about payroll taxes but you cannot demand on the specifications as to how the contractor will deliver the service that you need.
This is helpful when there are things that you want to be accomplished, but does not need a permanent staff to do that.
Employment Contract
This one contains the information about the terms and benefits of the employee under your business. It may contain the basic information like the name, nature of work, salary, duration of employment and benefits that the employee is entitled to. Both the employer and the contractor sign this type of contract.
Question #4: “How Can I Protect My Business Name?”
Deciding on a business name could be daunting for some, especially if you are looking for a phrase that would describe your business that at the same time witty enough to make an imprint to the minds of people.
Going through all the troubles of brainstorming for this is worth it and you do not want other businesses stealing your name.
ANSWER: Register your business name or file a Trademark
How to Register Your Business Name
Registering for a business name is a way to protect your business. However, this is commonly mistaken with the trademark registration. The name registration is part of the process you have to undergo if you are planning to form an LLC or incorporate your business.
If your business will not fall under this, you need to file a Fictitious Business name or Doing Business As (DBA) in your state. Accomplishing this will give you the legality of operating under that name and no other corporation or LLC can use that name.
Register Your Trademark
The business name registration will prohibit other LLC and corporation to use it, but how about partnership and sole proprietorship businesses.
How about the corporations and LLCs in other states?
Business name registration will not protect you from any of these, but trademark registration will.
Protect your trademark name by registering it to the United States Patent and Trademark Office (USPTO).
This is the process that will give you the exclusive rights to your mark even in the whole US. A business attorney can help explain to you the rules and help you understand better to make sure that your trademark is protected from infringement.
It is important for you to choose a name that will leave a strong mark because generic terms are not covered by trademark protection. The word cars, cakes, and hamburgers are all generic and can be used by anyone.
In a theory that the name Cheap Delicious Cakes passed for a trademark name, it is still difficult to defend it against infringement because the words are common and anyone might use it.
Protection of your business name does not end in the registration because you have to use it for all your marketing materials and products, if there are any. You should also pay the required renewal fee that depends on what state you are in.
Question #5: “How Can a Business Lawyer Help My Business?”
The advent of information technology makes it easier for us to access information that we need. The internet is teeming with drafts of different contracts for small businesses. Even the processes that you need to follow in trade name and trademark registration is just as click away.
However, there are minute details in the laws of the state, that when overlooked might put your business at risk. A business attorney is a great help not only in preventing the risks but in every step of the way.
Lawyers are very capable of answering all your business-related queries including the explanation on how you can start an enterprise. Preparation of contracts that you need is also their expertise and they can help lessen your liabilities, while making sure that you are still confirming to the rules set by the state.
Moreover, business lawyers are helpful on not only the start of your business but even when your business is beginning to grow because they can make sure that you are on the right track and is not violating any rules.
Are not sure where to go from here? Avail of a free consultation from a business attorney! Click here and ask your worries with someone expert in the field or email here.
Conclusion
Email me at sam@mollaeilaw.com if you have any questions about starting and growing your business!
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