4 Crucial Legal Measures For New Business Owners

Oct 31

Starting a new business is exhilarating, exciting, and a little scary. While you may have endless passion for your new business venture and are ready to hit the ground running, it’s essential to ensure that your legal ducks are in a row to protect yourself and ensure the longevity of your new project.

Small business owners take on a surprising amount of risk when starting and running a new company. Without the proper legal protections, you, as a small business owner, could risk losing the business and your personal assets. Below are four essential actions you should take to protect your business legally when starting a new company.

Form Your Legal Business Entity

In a perfect world, passionate small business owners could start doing what they love without all the red tape and logistics of forming a company. Unfortunately, this is not a perfect world, and the United States requires all businesses, from small solopreneurs to Fortune 500 Companies, to register their business entity with the local state government.

First, you’ll need to establish what kind of business you have. Common business structures include:

Sole Proprietorship
Limited Liability Company (LLC)
Corporation
Nonprofit
Partnerships

Each business structure has different benefits and drawbacks. LLCs, for example, are where most small businesses start. A Limited Liability Company (LLC) structure offers some legal protections for the owners and helps protect personal assets from the risk of lawsuits against the business. Sole proprietorships are another common starting point for a small business. While they tend to be cheaper to start and operate, they do not provide protections for the business owners’ personal assets. Nonprofits provide certain tax benefits but must provide services that respond to the community’s needs. Each business entity is taxed differently and is subject to different state laws.

Before registering your business with your state, you must gather key information. This includes your business name, location (or chosen business address, if you operate remotely), and potentially other important info, like banking information and partnership details. Failing to register the business legally (as in, running an illegal business) could have severe legal and financial implications, so ensure that you register your business as quickly as possible and certainly before providing goods and services to the public.

Comply With Local, Federal, and Industry Regulations

Many small businesses must identify and adhere to specific regulations about how their business will operate. For example, entrepreneurs running a local bakery must comply with stringent food safety and health regulations to ensure that their products are safe for consumers. This includes following guidelines set by agencies like the Food and Drug Administration (FDA) and local health departments regarding ingredient sourcing, kitchen sanitation, and labeling requirements. Additionally, marketing and consulting firms are another example of small businesses that face lengthy and strict guidelines around how to operate, particularly when it comes to hiring contractors and employees.

Before offering services, ensure you have all the necessary licenses and permits for the work you plan to do. Industries such as marketing or general business consulting often don’t require specific licenses, but they may be necessary for other industries, like financial consulting, accounting, or tax preparation. Each state and industry has different specifications for the types of licenses and permits that are mandated. Check with your local Small Business Administration to get an idea of their requirements in your state.

Additionally, if you plan on hiring employees, they may need to be certified or obtain accreditations to perform their work duties. Failing to carry the proper local and federal licenses and permits could result in hefty fines or could even close your business altogether.

Put the Proper Safeguards in Place

It’s tempting to hope nothing catastrophic will ever happen, such as a lawsuit or an injury, and save time and money by hoping for the best. However, as many small business owners will tell you, it’s better to be prepared for the worst. Businesses take on significant liability when they provide goods and services to the community and must appropriately protect against that liability.

These protections can include:

Getting small business insurance. General liability, commercial property, and commercial auto insurance are all great coverage options depending on your business needs. If you have employees, most states require workers' compensation insurance, and additional coverage may be necessary for company vehicles or specific types of work.
Perform risk assessment audits. The fewer accidents and lawsuits your business faces, the more likely your business is to grow without issues. Lawsuits, accidents, and settlements can derail your company’s success and slow growth. A risk assessment can ensure that you have the right safeguards in place to prevent major incidents in your line of work.
Draft a high-quality policy and procedures. Establishing a comprehensive guide for running your business will help you keep good records, treat employees fairly, and run your company efficiently and above board. An experienced lawyer can assist you in drafting your P&P to ensure that you’re following local and state laws, ensuring compliance, and creating a fair workplace.
Consult with a lawyer regarding your contracts. Legally binding agreements are essential to developing partnerships, working with clients, and growing your business. A well-versed small business lawyer can help you draft powerful contracts that protect you and your company. If you’re just starting out, contract templates are a great starting point.

Trademark Your Intellectual Property

An often overlooked aspect of starting a business is registering your trademarks. It is essential to do this early to avoid complicated and expensive legal disputes with people who may attempt to steal your brand name, product name(s), logos, slogans, and more. Registering your trademarks is only becoming more important as small businesses are more online than ever, making it easy for people worldwide to copy and sell your intellectual property.

Trademarks can take several months to get approved, so acting quickly is paramount to ensure that your business is protected legally. Putting brand protections in place early will give you the confidence to grow your business without worrying about lengthy and expensive legal battles over your designs, logos, and other intellectual property.

But there’s also so much more to trademarks than simply protecting your brand. While this is an incredibly important aspect of why people trademark, there are also a myriad of additional benefits. One of these benefits is legitimacy. The ability to market yourself as a real, bonafide brand with credibility is huge, especially if you’re still in the first years of your business journey. A trademark shows prospective clients, partners, and collaborators that you’re a force to be reckoned with. A trademark also increases the overall net worth of your company. Investing in trademarks can lead to increased sale value, should you pursue that avenue one day.

Get Trademark Registration Support Today

Make sure your business is protected for the future with Mika Mooney Law. I’m here to work with you through the entire trademarking journey and beyond. You’re working hard to build a successful business – let me help you protect your brand from theft, copycats, and legal disputes. Reach out today to discuss your specific trademarking needs.