Starting a business can be a worthwhile and profitable venture. However, there are many legal and regulatory issues that you may need to be aware of before you begin operations, while you are in business and even if you decide to dissolve the company. Let’s take a look at six legal issues that you and your partners should be aware of while operating a business.
Incorporate Before You Start Doing Business
The first thing that you should do is look to incorporate in the state where you intend to do business. While you may be advised to incorporate in a state such as Delaware or Nevada, you will also have to incorporate in your home state to do business there. When you incorporate, you can choose the corporate structure or form a Limited Liability Company and ask state and federal tax agencies to treat your business like a corporation. Creating an entity that is separate from its owner is important because anyone who files a lawsuit against the company can only go after company assets as opposed to the owner’s personal assets.
Determine Ahead of Time How a Partner May Leave the Company
If you have partners, there is a chance that they may want to leave the company at some point. Therefore, it is a good idea to spell out what happens to that partner’s equity, what it will be valued at and if other partners have any right to stop that person from leaving. Its’ important to have a lawyer to help with situations such as this.
Apply for Trademarks and Patents Before You Need to Use Them
Intellectual property is one of the most valuable assets that a new company has. However, if there are no trademarks or patents on that property, other companies may take it and use it as their own. Working with professionals may make it easier for small business owners to get trademarks and patents and make sure that an idea hasn’t already been trademarked or patented elsewhere.
Put All Deals In Writing
It is critical that all contracts and other important deals be put into writing. This is because putting a deal in writing makes it easier to enforce and makes resolving disputes easier when both sides know what is expected of them. Operating agreements, customer contracts and employment contracts are all examples of documents that should in writing and kept on file at all times.
Going to Court Isn’t Always in Your Best Interest
Resolving a dispute with a customer or employee outside of court is always a desirable outcome. This is because it takes less time, costs less money and allows the two sides to settle their dispute amicably. While you shouldn’t be afraid to go to court to enforce a deal if you have to, it can often cost more in terms of time and financial resources than it is worth even if you win.
Always Be Aware of Liability Risks
One of the most important things that your company needs to be aware of is anything that it may be legally liable for. For instance, if a customer slips and falls on company property or is injured while using a product that the company sold, it could be liable for damages related to any injuries suffered. Therefore, it should have adequate insurance from the beginning to make sure that the business is financially protected if an accident occurs.
The law doesn’t care if you are a starting your first company or have been in business your entire life. If you are liable for an accident or don’t have a formal contract with a customer, it could cost your business money that it may not have. Therefore, it is a good idea to know the basics of business law and know where you can go for help if you need it.
Informational credit to Doré Law Group.
This article is courtesy of Anita Ginsburg, a freelance writer from Denver who often writes about home, family, law and business. A mother of two, she enjoys traveling with her family when she isn’t writing.