When you sit down to start your business, you, like most business owners, are drawn to think about the product or the service that you are going to introduce to the marketplace. But, as important as any of those ideas are the steps you need to take to turn your idea into a reality. Below is a brief cheklist of some of the issues you need to address to make your business a reality.
1. Business Plan and Budget
This one is simply a good practice. It may also be required by some banks when evaluating whether to give you a loan. Regardless of whether it is required by a bank or investor, it is imperative that you sit down and make both a budget and a business plan. They don’t have to be long but they need to be clear and as accurate as possible. Our budget consisted of our initial costs and our monthly costs. Our business plan grew into about five pages. You can fit everything you need in a business plan into five pages or less.
2. Entity Formation
This is the first legal step in the process. You need to determine the type of entity you should form (hint: it’s almost never a sole proprietorship). This could be an LLC (most common today), a partnership, or a corporation. There are many variations among these three categories. The primary considerations in making an entity choice are limiting liability, taxation, and management structure.
I always recommend that new business owners sit down with someone who specializes in insuring businesses. They will know the requirements for workers’ compensation (4 or more employees) and be able to recommend liability insurance. This contact will also be able to provide guidance as your business grows to protect you and your business partners through key man insurance and by funding buy-sell agreements.
4. Business License
This one is frequently overlooked. As an aspiring business owner, the city or county where you are located will likely require that you obtain a business license. Not only that, but they also typically require that you give them some of the money that you earn. Contact the business license division in your area and they will assist you through the process.
5. Employment Laws
Employment law can be an intimidating area of law even for some lawyers because it is broad and comes down from both federal and state levels. Do your best to brush up on these laws. Most employers get into trouble, not because they purposely broke the law, but because they were not aware of it. And, sorry, but ignorance is no excuse. At a minimum, be sure you understand your requirements in paying wages and basic discrimination laws.
This is simply advice based on what we see as business lawyers on a daily basis. Do your absolute best to make sure that the day you are open for business that you are ready to provide your customers exceptional quality. This mean your telephone and internet need to be working. You need to have questionnaires and processes in place. Your printer and other equipment needs to be functional. In other words, be prepared.
As your business grows, you will find out that there are endless legal and other business problems that will arise. The more successful you are, the more of a target you are. Be mindful to take appropriate steps to stay ahead of the legal pitfalls that may damage or even sink your business.
About the Author
Wesley Henderson is a business attorney with Henderson & Henderson. His Charleston, SC law firm focuses on helping businesses navigate their legal environment, including using intellectual property tools as an advantage to protect their assets. Wesley can be reached by email or by phone at 843-212-3188.