Your new business is your baby, after all. Don’t you want to protect your baby?
6 min read
Opinions expressed by Entrepreneur contributors are their own.
As a lawyer, I’ve represented many businesses but often found that small business owners make major mistakes thatl leave them legally vulnerable. If big guys like Hertz can fall victim to business schemes, think about how much more vulnerable your tech startup or fledgling new ecommerce fashion site might be.
Related: 5 Ways Your Business Can Protect Its Online Brand
That’s why your first steps toward launching your new business are critical.
National Small Business Week is a good time to think about protecting what you’re building. So, whether you’re just starting to brainstorm a new business idea or are a couple of years into building your own business, it’s important that you properly protect yourself as well as your business. Don’t wait to fall victim to make the following imperative decisions.
Line up your resources.
There are many reliable, free sources out there that people are aware of and the topics they cover are crucial.
Think about the process of buying a website domain, for instance. Just because your desired domain name is available doesn’t mean that your business name is. So be sure to dive deeper and use the U.S. Patent and Trademark Office’s database to ensure your business name is truly available.
Another one of your first steps should be to explore the Small Business Administration’s website. I can’t even tell you how many times I’ve recommended this to clients and found that my raising the point is their first time ever hearing about it.
The SBA not only offers a slew of information to help you get started on profiting off of your idea, but also offers free business counseling and even partners you with a mentor.
Decide on your business model.
As an entrepreneur, do you want to be a solopreneur or part of a partnership as you start your empire? Your business model is going to constantly change, and that’s okay. But you need to ask yourself if this business launch is something that you want to take on alone, or something for which you need a partner.
Related: What Should You Do About Copycat Competitors?
Plenty of successful businesses were started alone, but having a partner is more often than not a better idea because a sidekick can make up for any skills and resources you lack. I always say to hire people who are smarter than you. And I mean that literally: Don’t just think about your business in its current state, but think about the future as well.
Figure out your money situation.
Money is a sensitive topic, but small business owners need to be prepared for all kinds of money talk. I’ve seen plenty of clients successfully start their businesses on a shoestring budget, but more often than not I see these hopefuls skyrocket at the start, then struggle to figure out where the rest of their funding is coming from.
Chances are that you’re not starting a business just to make ends meet. The more money you have to start your business, the more you can do. There are various loan programs for small business owners out there; you just have to know where to look.
Work on your online presence.
It’s 2019, and everyone needs to have some kind of online presence. Even if you have a brick and mortar store, a big part of commerce is done online. Your customers have to be able to easily find you. In that context, I always tell clients to focus on these things:
Be sure your business is on all major social platforms, and you should be using the same name across all channels. This will make it easier for people to search and find you.
Be interactive with your audience; otherwise they’ll easily stray somewhere else. You can’t just post ten times a week, and completely ignore your audience. You need to interact with them in order to build trust and loyalty.
Be transparent with your audience. There is so much going on behind the scenes that can easily be skewed. If you ever have the opportunity to connect with your audience on a deeper level, always take it. It’s the only way that they can get to know you.
Think about incorporating sooner rather than later.
Incorporating is a legal formality. It means that you are creating a separate legal entity that doesn’t leave you personally at fault for anything business-related.
There are various benefits, but the top are:
Your personal assets will be protected.
You can enhance your business capital and establish credit for it.
Corporations provide a legacy beyond the lifespan of a founder or CEO.
Incorporating can provide the business owner with anonymity if needed.
Having a corporation provides additional credibility to your business.
You also need to decide what kind of corporation would be best for your business’s future. Most decisions will come down to either an S Corp or a C Corp. Here’s a small breakdown of their differences:
You’ll have tax-deductible business expenses.
The business owners pay personal income taxes on any profits; the business must also pay a separate corporate income tax.
It’s much easier to raise capital as a C Corp.
The most common reason to switch to an S-corp is the taxation advantage; you’re eliminating the double taxation of income.
You can’t have more than 100 shareholders.
The individual taxes and business taxes are completely separate
Double-check your protections.
Get everything in writing! Verbal contracts are tricky to prove in court, so getting as much as your can down on paper makes a huge difference if you ever face a legal problem. Not enough business owners do this, and it doesn’t matter how well you know the people that you are doing business with, because things can always fall apart, especially in business.
Also think about trademarking your business name. Registering for a trademark establishes your right to an item or symbol. It benefits owners by making sure that their trademark can’t be used by anyone else without their consent. Damages also are easier to prove if you have a trademark, especially when it comes to an infringement lawsuit.
Related: Apply For a Trademark Before It’s Too Late
So … tradmarks, incorporation, choice of business model: These are a few of the ways you should be thinking about this National Small Busines Week to protect your baby. You do want to protect your baby, don’t you?