Starting a new business will usually place quite a number of responsibilities on your shoulder, some of which include managing employees, dealing with customers, building and growing your brand, making sure you have a great product or service, and much more. This can, of course, be quite a challenging time for a new business owner. However, with all these things that the business owner has to deal with, one thing that has the potential to cripple the entire business if not properly handled, are legal issues.
The complexity of the law, the relatively little knowledge that laypeople usually have about the law, and the high cost of hiring a business lawyer to help resolve any legal issues are some of the reasons why business people and most people, in general, like to keep lawyers at arm’s length except only when they are absolutely needed.
Having said that, there are some aspects of starting or running a business that if not handled properly, will not only necessitate you needing to spend a lot of time dealing with lawyers at a future date, but it could very easily spell doom for your business later on.
Here are 5 of the most important legal things you must get done in the early days of your business.
Draw up a Solid Business Formation Contract
It is critically important that your business or company’s foundation is well-grounded on a solid contract and other legal documents that legally recognizes its formation and existence, whether as a sole proprietorship, partnership, not-for-profit, LLC, or corporation.
This will involve things like ensuring that the business is structured properly, which might involve things like forming an LLC or any other appropriate company structure. Also, the appropriate business formation documents must also be in place to ensure that various aspects of the business are properly regulated.
These business formation documents, including things like Articles of Organization or Incorporation, Operating Agreement, and Corporate Bylaws are essential to help prevent certain issues with the business that may crop up in the future or to ensure that even if these issues do arise there are clear paths and guidelines on how to resolve them. This is perhaps especially relevant to partnerships, who can often have disagreements, but with no clear way on how to resolve them.
Get Your Business, Domain, Product Name Checked
Potential Intellectual Property violations are something that should be treated with the utmost care. Before you go live with your business, you should be sure to do the necessary research to ensure your business will not be violating any existing trademark, copyright, patent, or trade secret. Doing so can end up being rather costly for you and your business in the long run.
Something as simple as performing a search in Google to find any common usages of the name you want to use for your business or product can go a long way in preventing you from infringing on someone else’s protected body of work.
Get Your Federal Tax ID Number
Getting your federal tax identification number is yet another important task that must be undertaken in the very early days of your business enterprise. Also known as or referred to as an Employer Identification Number (EIN), this number is what is used to identify your business with the Internal Revenue Service (IRS) and will also allow you to open a business bank account, pay federal taxes, hire employees, among other things.
The importance of EIN cannot be overemphasized. Most people will have heard about the IRS and how they are a government agency that is not to be messed with. There are usually very often harsh penalties or consequences for anyone who is caught flouting any rules as it relates to federal taxes and it would be in the interest of both you and your business to make sure everything regarding federal tax matters is above board.
Get a Business Licence
While this is not always required for certain kinds of businesses, there are some types of businesses that require a business license before they can legally operate. Failure to do so can spell trouble both for the business as an entity, and in certain highly-regulated professions like medical or legal professions, can leave the individual criminally liable.
This might even be the case for a virtual business. When you are a virtual business operating exclusively online, it is quite really easy to forget that you are still a company physically existing somewhere, and at such might still require a license to operate, depending on the specific laws that govern the county or state you operate from.
Get the Necessary Insurance
While you are not always required to have business insurance, certain critical or highly regulated industries legally require you to have business insurance before you can operate your business.
For example, any business that will have a certain number of employees will likely be required by law to have workers’ compensation insurance. Similarly, businesses in the commercial transportation industry, certain professional services like medical and construction, and businesses that sell liquor will likely need to have their appropriate types of insurance.
Failure to have the correct type of insurance while operating your business not only exposes the business to all types of liability but in some cases can expose the member or owner of the business personally and/or criminally liable as well.`
Owning and running your own business can be just as rewarding as it can be challenging. In the same way that there are certain things that you can do to increase the possibility that the business will be rewarding, like investing in a robust digital marketing campaign, there are also certain things that you can and should do to ensure that many of the challenges that the business could face are minimized. While not exhaustive, the above-listed items are some of the things that can be done.
Kanayo Okwuraiwe is a startup founder, an incurable entrepreneur, and a digital marketing professional. He is also the founder of Telligent Marketing LLC, a digital marketing agency that provides lawyer SEO services to help them grow their law practices. Connect with him on LinkedIn.