The economy today is moving faster than ever, giving aspiring small business owners the chance to develop a business plan and cultivate their own destiny. Yet, in their haste to beat others to the punch, many small business owners forget about the sometimes cumbersome, but always important, red tape that comes with this responsibility.
Whether you are just starting out or have been operating for years, there are many legal obligations and considerations that confront small business owners, and you need to protect your assets just like any large company would. Understanding your responsibilities as a small business owner ensures your labor of love is legally protected.
Tips to set your business up for success
From filing important documents, to hiring legal counsel and ensuring your financial house is in order, the process of starting a small business can seem like a daunting endeavor. Yet, knowing the top legal tips for operating your own business will set you up for success.
Tip 1: File originating documents.
For most businesses, certain legal documents must be filled out and submitted in order to get your business off the ground. If you are operating as a corporation, you need to file articles of incorporation, and if you are operating as a limited liability company (LLC), you need to file articles of organization. While there are many products available online these days, which make filing your business easier than ever before (LegalZoom, for instance), it’s often best to seek guidance from a lawyer who understands the intricacies associated with small business ownership—and will ensure you don’t miss an integral step in the process.
Tip 2: Get your financial house in order.
At the start of any business endeavor, you want to ensure you have the financial fortitude to ensure success.
- Start by opening bank accounts and obtaining credit in the name of your business, and keep those accounts separate from your personal accounts. Failure to do so can result in a court finding that your business is not considered to be a separate legal entity, resulting in your becoming personally liable for debts or lawsuits against the business.
- Pay all necessary taxes, obtain insurance and manage your receivables. Certain insurance is usually required by law to operate a business.
- If someone doesn’t pay you and there’s no basis for non-payment, pursue them using a debt collector or lawyer.
Tip 3: Implement written contracts and agreements.
Many small business owners make the mistake of operating without written contracts, simply relying on a handshake or verbal agreement. Having written contracts ensures you understand your rights and responsibilities. This is also a good time to create a “Business Will,” a document that helps you prepare your business for the future. This document details what happens should one party leave the business, avoiding the need for litigation in the future.
Tip 4: Seek counsel and make sure you have the right attorney for each task.
For instance, if you need to obtain a patent, work with a patent attorney. Opting for a general practice lawyer who covers a broad range of areas may save you money upfront, but their lack of expertise in a specific field could cost you down the road. When you hire a lawyer from the start, he/she can let you know if you might need specialized services.
Tip 5: Adopt a recordkeeping program.
A common issue for small business owners is failing to maintain required records. As your business grows, it is essential to maintain accurate books and records for your business. Adopting and following a recordkeeping program can save you from a future legal headache.
Legal experts: your partners on the journey
Owning a business can be one of the most rewarding experiences of your life. As a small business owner myself, I understand firsthand the complexities that come with this responsibility. Contact KC Law today to learn how we can be your partner in small business ownership.