Small business owners are the people that help local economies thrive and are a small piece of the American dream. However, it’s unfortunate that most of these entrepreneurs overlook the legal aspect of their businesses for the most part. This is a disservice to the company they’ve built. As a small business owner, you put a lot of effort into growing your company. It’s become important to you and you should do everything you can to safeguard it.
Based on the experiences of many small business owners, here’s a list of important legal necessities that every company needs to build a solid foundation and safeguard its reputation.
Make It Official: Register Your Business
A lot of the time, small business owners begin their operation as a side business before growing into something much larger. Maybe you offer a service to people or sell a product and it begins small, making some extra income. Then, you eventually have enough income to leave your current job and take the plunge. This is when you want to make your business official by registering your business.
Why should you register your business? Here’s a few of the reasons.
For both you and your customers, registering your company with the state gives it legitimacy. Clients are more inclined to work with someone who conducts their company professionally rather than as a hobby or a side hustle. A registered company establishes credibility, which demonstrates to the customer that you are serious about your work.
You may also apply for grants and loans once you register your Business. As a small business owner, you strive to grow your business. Sometimes, you have to borrow money to accomplish this. If you want to borrow a month, most loan applications demand that your company be registered.
With a registered company, you’ll be able to get an employer identification number (EIN), which will enable you to open business bank accounts.
Open a Bank Account for Your Business
When you started, you used your personal bank account to fund everything. However, it’s essential to open a separate account for it right away. The primary reason for this is that it protects your personal funds in the event that your business is sued. If you don’t have a company account, you’ll have to pay any damages from your personal money.
You may also use a business bank account to keep track of expenditures and establish a company budget. Many small business owners don’t have an account separate from their personal bank account. When you do this, genuine company costs like office supplies or business travel are mixed in with food and vacations. When you combine your company and personal expenditures, it’s more difficult to tell which purchases are for business and which are for personal use, which may result in fewer tax deductions.
Use Legit Contracts
Using a contract helps protect your company in the event that there’s a dispute between you and your client.
You never know who you are dealing with, no matter how nice a person initially is. A frequent error among small company owners, particularly new ones, is a reluctance to write down agreements. People sometimes say they are worried a written contract would insult the other party or that they don’t expect any problems. However, problems emerge at some point and having a good contract will help you in a dispute with a customer.
If you move forward on good faith or a handshake, there’s no protection to your company. These kinds of deals can result in your company coming up short in a dispute or lawsuit, because you simply have no proof as to what you and the customer agreed to. You should always use a contract, even if you’re working for friends. If there’s a dispute, you may no longer be friends.
If you need a specific contract for your business, you can always hire a lawyer to do this, as they will know the correct verbiage to include to protect your company in the event of a dispute. Make sure to enlist an attorney who is knowledgeable about your line of work. If you’re a body shop owner, maybe you hire a car accident lawyer. After all, if you’re doing construction in Delaware, you probably won’t contact a personal injury attorney nyc.
Perform the right steps that will set your company up to be profitable. You’ve worked far too hard to build your company to trust it to a handshake agreement or a badly drafted contract template you discovered on the internet.
Trademarks Are Important
You do not have to be in business for years to apply for a federally registered trademark. You can actually file a trademark application as soon as you have a business to trademark. The sooner the better. Trademarks not only protect you from people infringing on your intellectual property, but they also protect you from infringing on other companies’ intellectual property.
If you do not get your trademark application in sooner than later, it may cost you. Imagine building your business, spending thousands to market it and become successful, only to find out later that another company with the same name and in the same business had already trademarked it? This is the worst case scenario, but you don’t want it to happen to you. If it does, you may have to alter the name of your company and spend even more money re-marketing it.
Estate Planning: It’s a Good Contingency Plan
You probably don’t want to think about it too much, but death is something that should be addressed. If you die or become incapacitated, a plan should be in place for your company, the same way you want to provide for your children after you pass away.
An estate plan will ensure that your company is taken care of after your death or if you become too sick to work. This gives you control and guarantees that your company continues on without you.
Your priority for your business is to establish a solid foundation that gives you both control and protection. If you set up these things, you can focus on the most important thing: operating your business.