Entrepreneurs have a basic understanding of the law, but there are cases when some of them fail to meet all the legal implications of starting a business. Numerous start-ups try to save money on hiring an attorney, and they look for alternatives. However, the process comes with countless unforeseen legal problems. Businesspersons are not dealing only with the legal aspects of starting a business, but also with the ones of managing it. If they choose to ignore them, they can experience costly consequences.
This article will share with the readers the main five legal aspects, all entrepreneurs should check before starting a company.
1. Every business needs a legal structure
Determining the right business structure is a critical step in creating a successful business. Entrepreneurs can choose from multiple business structures. The investors have to decide if they want to keep the business private in the future, or they plan to go public. In addition, they will have to decide if they will privately fund the business, or they will have partners. The predicted growth of the company is also an important role in deciding the legal structure of the business.
Different legal structures have different tax implications, procedural and legal requirements, and various forms of business governance.
Each state comes with its own legal business structures, the main ones are sole-proprietorship, partnership, corporation, and Limited Liability Company.
2. Perform a trademark search
When starting a business, entrepreneurs have a name in mind, but it is advisable to check if it is legal and feasible. Before establishing it, it is important for the entrepreneur to check if it not used or trademarked by another company. The same goes for the name of any product or service. The trademark search should be performed with the Patent and Trademark Office, to avoid using another company’s trademark, and facing a lawsuit.
The name of the business will influence the name of the web address. If it is taken by another company, the new business will have to pay for the domain name, but this is not a feasible strategy.
The companies that infringe someone else’s mark or name are ordered by the law to give up their profits earned by the use of the unregistered mark. In addition, they will have to pay fines and taxes for punitive damages.
3. All businesses are legally required to have insurance
Small business can choose from a wide range of insurances. According to their structure, they can opt for professionally indemnity, public liability, business contents insurance, or even tool insurance. The covers can be combined according to the type of business the entrepreneur runs. The insurance protects the owner of the business from lawsuits. Frequently, litigation is used as a strategy to identify or protect liability.
The business owner makes substantial investments to purchase inventory, equipment and property. All businesses need a sort of infrastructure to keep them moving. The insurance policy protects the company in case of disasters, damage or theft.
Once the business has employees, the responsibilities of the entrepreneur grow, and they are legally obliged to include in their insurance the workers’ compensation.
Multiple companies get key person insurance. If a key employee or the business owner dies, gets injured or ill, the insurance will protect the company until a successor takes the business, or until the key person recuperates.
4. An attorney should handle the legal pitfalls of the business
Unfortunately, entrepreneurs do not work in a Utopian society where all companies flourish. Legal problems arise, mistakes happen and they inevitably need an attorney. Having a good attorney protects the business from legal implications. They can prevent a business from experiencing lawsuits. Hiring them after the business is sued is too late, because they can only reduce the charges, but they cannot protect the company entirely. If the investor is proactive, they hire the attorney ahead, and they cover all their bases.
Employee-related problems are common in the workplace, and they can leave the business low on money. Having a team of injury attorneys by their side helps entrepreneurs diminish the problems, and manage employees without having legal repercussions. They can prevent an employee injury lawsuit, draft up agreements if the business collaborates with independent contractors, and administer the worker’s compensation.
When the company is taking their business overseas, it performs dealings across state lines, or when they pay their taxes, they need to follow certain regulations and rules. No matter the type of business, corporate compliance affects all companies. An attorney will ensure that the firm is compliant with all laws that might apply to it.
5. All companies have to obtain business permits and licenses
The entrepreneur is starting a business in an environment that is highly regulated; therefore, they need to check the local, state and federal regulations. Most companies need a license in order to legally operate. They need to obtain it from the local municipality. If they fail to get the license, they will experience penalties and fines. Failing to get the needed permits and licenses is one of the main legal problems start-ups are dealing with.
According to the type of industry, the business falls under, the licenses and permits are determined. The state and county websites offer extended information about the types of companies that need permits and licenses in order to operate.
The main reason why companies need business licenses and permits is for taxation purposes. They help the government establish the amount of revenue they need to take for taxation purposes. While some licenses are required for tax reasons, others are needed because the governments have as goal to regulate the businesses that can affect public safety.
If the business can harm the environment, the entrepreneur needs to check what the specific permits and licenses for their firm are. The general rule is that if the business person starts a company that comes to a public, it has to be licensed. Some permits reflect the level of expertise the investor has in the industry.
The resources from above will help entrepreneurs to work their way through the process. If they need additional guidance, they can consult attorneys and law firms.