Top Three Legal Must-Dos in Your First Year of Business

Starting a business is an exciting affair and is filled with visions of success and growth. But amidst all the excitement, there's the paramount need to ensure your business is legally fit from the start. Here are the three most critical legal must-dos to set your business up for a successful, compliant first year:.

1. Select the Most Appropriate Business Structure

Your first move is to choose the proper legal structure for your business. This decision has everything to do with your tax liabilities, personal exposure to liability, and fundraising possibilities. The most typical structures follow:

- Sole Proprietorship: The most straightforward form for all businesses owned by an individual. It is, however, without personal liability protection.

- Partnership: Suitable for businesses having two or more owners, this can either be general or limited, and the liability and involvement vary.

Limited Liability Company (LLC): Combines limited liability of the corporation with the management and tax structure flexibility of a partnership.

- Corporation: A more complex structure that can shield owners from liabilities. Owners may raise capital by selling interests in the corporation. The corporation may be incorporated as a C corporation or an S corporation. A business must generally file a corporate tax return with the possibility of paying additional taxes on its profits.

The choice of the proper structure depends on your business goals, the level of risk you want to undertake, and your financial situation. Make an informed choice; consult with a business attorney or accountant.

2. Safeguard your intellectual property.

Your brand, logo, product designs, and even your business name are things of value that must be protected. Intellectual property protects your business's unique qualities so no one else can use them. Necessary steps to protect IP include:

- Trademark Your Brand: register your business name, logo, and tagline with the United States Patent and Trademark Office (USPTO). This way, other people won't be able to use confusingly similar marks that are likely to confuse your customers.

- Patents - if your business involves products or processes that are innovative, consider applying for a patent. Patents protect your inventions and give you exclusive rights to produce and sell them.

- Copyrights: Protect your original works, for example, written content, designs, and software, by registering for copyrights so that you are in a position to have control over the use of these works.

By securing your IP, you protect not just your brand but also enhance the value of your brand to make it a precious asset for opportunities and future growth.

3. Draft Crucial Agreements and Contracts

Well-drafted and clear contracts are the backbone of any well-run business. They help to ensure that parties do not fall out with each other, are clear about what they are to do, and provide necessary legal protection. Some of the critical contracts include:

- Operating Agreement: It prescribes for LLCs the structure of ownership and management, distribution of responsibilities, and processes for removing and adding members. Though not strictly required by law, this is an important document that should not be lacking for internal governance and liability protection purposes.

- Partnership Agreement: When starting a partnership, an elaborative partnership agreement must specify what each partner will contribute, how they will share in profits, and the procedure to settle any disputes.

- Employment Agreements: lay down what kind of role, compensation, and responsibility one should expect from the role and whether confidentiality clauses are involved. This is especially important as you begin to hire a staff.

- Non-Disclosure Agreements (NDAs): NDA will apply in highly sensitive cases and during which you have to share such information with employees, contractors, or even potential business partners. It ensures that your business secrets remain confidential.

- Service or Product Contracts: In the instance where a service is to be provided or a product sold, a contract in a standardized manner can protect both parties from misunderstandings.

The time and resources that are spent developing good contracts develop trust and clarity, which consequently reduce the risk for legal issues after that.

Usually, the first year of business is a whirlwind of activity; however, attending to these legal essentials will establish a solid foundation for your new venture to flourish. By selecting the appropriate business structure and taking careful actions concerning your intellectual property and the drafting of essential contracts, you are working to protect your business against future legal pitfalls and making it a worthwhile venture in the long run. Remember that these issues are intricate and different in each business.  Therefore, it is always best to consult competent legal counsel to be fully compliant and protected based on your particular situation.  Click here to schedule a no-cost consultation to see how we can help!