Startup Founders: Important Legal Steps to Take
Budding entrepreneurs and business owners are always in search of ways to turn their dreams into profitable business ventures. Although the zeal and optimism is ever-present, most startup founders are oblivious of the legal aspects of owning a business. Of course, regulations and filings are not as exciting as landing the first set of clients, they are vital to the growth of any successful startup. This is why there are business attorneys that offer legal help for startups.
Here’s a rundown of some important legal steps to take when starting a business:
Choosing A Legally Accepted Name
The first (and most important) legal step to take for your startup is to ensure that your chosen business name is not infringing the right of an existing business. You can search the online database of the Secretary of State in your state to search business names that are registered or unavailable. Attorneys are ready to provide legal help for startups for this.
Startup founders should also seek legal help to conduct a no-conflict trademark search within the United States Patent and Trademark Office. This will help confirm if a well thought-out name is available in all 50 states of the United States of America. The reason why this step is important to any startup is the possible risks of infringing on another company’s trademark, which can cause a lawsuit should you proceed with the use of a trademarked entity.
Formation Of Lcc Or Business Corporation
Forming a corporation or a limited liability company (LLC) is a vital step to take as a startup founder. Why? It helps secure your personal assets (your kids college fund and other personal property) from liabilities incurred by the company. Establishing if it is a corporation or a limited company is important because it makes founders aware of the advantages and disadvantages of each business structure.
Business structures are: limited liability company, which is best for small businesses; C corporations, best for companies that want to go public or get funds from a venture capital; and the S corporation. Corporate attorneys can offer legal help for startups on the aspect of business structure. One legal advice for startup founders is if the business has less than five shareholders it is best to form a limited liability company in the state of operation.
Acquiring Federal Tax Identification Number
Getting a federal tax ID helps to distinguish a business as a unique legal entity. This number is also called the employer identification number (EIN). The identification number is issued by the Internal Revenue Service. It helps the agency track the company’s transactions. Typically, a sole proprietorship business is not obligated to get a tax identification number. But it is best to do so for other business matters that might occur in the future.
Getting Accustomed to Employee Laws
A critical obligation of a startup founder is to get legal assistance with hiring employees. Venture attorneys offer legal help for startups looking to hire employees. As a founder, you can spend countless hours without a lawyer trying to understand your required obligations regarding employee matters or you can save time by having one. Procedures you should seek legal assistance with includes:
withholding and payroll taxes
worker’s compensation rules
hour and wage requirements
Obtaining Business Licences and Permits
In line with your business location and the type of business you run, as a startup founder you may need to acquire one or more business permits and licences from the local, state, or federal authority. These licences may include:
- A general business venture operation licence
- Land use permits and zoning licence
- Health department permits
- Sales tax licence
- Professional or occupational licence
Filing for Trademark Protection
Among available legal help for startups, attorneys can help startup founders deal with this filing for trademark protection. Now, using a unique name directly gives the business founder a common right as the owner of that name. This can happen without formal registration. But trademark law is not so straightforward. To claim first use of a business name, the name should be trademarked under state laws. Since you spent quality time figuring the best name for your business and logo (or other distinguishing mark), you should exert more effort towards securing legal protection. One benefit of registering a trademark is that it makes it easier to recover properties. For example, social media pages with the same name as your brand or business.
Opening a Bank Account or Line of Credit for your Business
Though you do not necessarily need legal help when opening a bank account or line of credit, it does not take away its importance. When you depend on your personal credit to fund your new company, your personal cards, personal mortgage, and auto loan will affect your ability to score business loans. But it does not end there. It also affects how much the loan amounts and interest rates if you decide you choose to go that route. Opening a bank account for your business with your business name and ensuring that it shows a reasonable cash flow, increases the chances of scoring a business loan; as well as, shows your investment into the business you see. Now here is the twist: If you have a detailed business plan and seek a loan or capital through other means, having your plan reviewed by a business attorney can be helpful to the success of getting it.
It’s imperative that startup founders do not miss out on these important legal steps to take. Better to plan to mitigate risk rather than face legal ramifications (and not knowing does not hold up in court). The best part is venture and corporate attorneys offer legal help for startups all the time.