If you asked me a few weeks ago if I knew any entrepreneurs, I would say…maybe that guy from college who allegedly “sees Elon Musk at work…” However, since then, I have by a series of serendipitous events (and law school requirements) found myself enrolled in a course on creating a company, cunningly called Company Creation. So far, I am loving learning about these new-to-me legal topics and have compiled a few legal concepts that are good for someone starting a business to know.
The following 10 questions should be explored by anyone starting a business.
- Are you still spellchecking entrepreneur?
photo courtesy of photos-public-domain.com
Understanding new terminology will go a long way when you begin making decisions about your business. A good beginner’s list and some examples from Entrepreneurship Law: Company Creation by Professor Samantha Prince to research includes:
Sole proprietorship: This is a single owner business with no formal filing of organization. This is a risky option because you are the business, and your assets are the business assets.
Corporations: A corporation is a “separate, distinct, organization.” Contrary to common belief, or at least to my preconceived notion, even one person can make up a corporation. Although you may want “to keep things simple,” a corporation might be an appropriate option to consider because of the protection is provides.
Limited Liability Company: An LLC may be a good option for getting your business started; however, this “hybrid between a partnership and corporation” should be thoroughly discussed with counsel to avoid unexpected tax consequences.
Understanding what these mean and how they differ will help you choose the best entity structure for your business from the start. For more information, visit: Entity Types – Entrepreneurship Law: Company Creation (unizin.org)
- Who makes the law?
There are many sources of law you have to comply with as a business owner. Agencies, often called the “fourth branch,” have regulations for nearly everything. From the USDA and honeybees to the FCC not letting Eminem be, every business is in one way or another affected by agency regulations. Federal agencies, state agencies, legislators, courts, local governments, and more all have laws and policies with which you will have to comply.
- How do you feel about your name being public?
Different states approach privacy of business owners differently. In Pennsylvania, when you register a business, your name is publicly associated with that business. If your business is controversial to the community, evaluating how your state approaches privacy for business owners is a crucial consideration.
- Where are you?
photo courtesy of clkr.com
More importantly, “where,” is your business? You have probably heard that businesses favor Delaware; there’s a reason for this! Delaware has a Court of Chancery that provides business with predictability because disputes are adjudicated by a judge rather than a jury, which are inherently unpredictable. If you haven’t read about any controversial things lately, you can search online whether or not shell companies in Delaware are a plus.
- What kind of reputation do you have?
When you decide what to name your business, be wary about using your own name. While it is doubtful anyone is starting a business with the expectation that it will fail, it is important to prepare for the possibility. Protect your reputation and opt not to share your family name with the business name. This can be important not only personally but also for future business endeavors.
For more information, visit: What Percentage Of Small Businesses Fail — And How Can You Avoid Being One Of Them? (forbes.com)
- Can you make your mark?
Trademark protection, state and federal, is one way to build stability and protection for investors, including yourself. Registration provides your business with a handful of benefits, including protection from “copycat,” imports and the presumption of notice for anyone who begins to use your mark after you have registered. Basically, this means the law will be more on your side if someone tries to copy your business. And, you get to use a little ®. For more information, visit: Trademarks | USPTO
- Is licensing an option?
If your business is centered around an invention, you will likely want to take steps to patent it. For instance, did you think of a new bottle with a detachable pacifier? Great idea! Parents everywhere will thank you. Once you have secured intellectual property rights to your invention, as Christopher Hawker writes on Entrepneur.com “Leverage the success of an already established company…” For more information, see: Why Licensing is the Best Way to Get Your Product on Store Shelves (entrepreneur.com)
- What assets do you have behind the veil?
Piercing the veil is when a company has a judgement against it and the courts go after the personal assets of the owner (i.e., your family home, car, maybe even that fancy new desk chair you bought to work from home). This is why it is critically important to structure your business in a way that protects you personally.
Photo courtesy of Wikimedia Commons
- Do you have an accountant?
To be honest, I would be completely out of my league to explain the best way to “do your taxes.” But, I can be cliché and say do your taxes and do them well. For your business, this likely means finding an expert in business taxes. You should look into this before starting a business, as your lawyer will be able to explain much better than me which entities have what taxes. Which brings me to my final point…
- Do you have a lawyer?
Lastly, find an attorney to help navigate all of these considerations. Many laws are applied by default to a business that starts without filing or establishing their entity through formalities. If you are thinking about taking the big leap to becoming an entrepreneur, seek the counsel of a seasoned business attorney. Your counsel will be able to talk through your goals and options to find out what the next best steps are.
Not a lawyer,
Anne
Sources:
“Antique World Map Clipart Image.” CLKER FREE Clipart, www.clker.com/clipart-657793.html.
Arnold, Karen. “Scales Of Justice Free Stock Photo – Public Domain Pictures.” Free Stock Photo – Public Domain Pictures, www.publicdomainpictures.net/en/view-image.php?image=72186&picture=scales-of-justice.
Hawker, Christopher. “Why Licensing Is the Best Way to Get Your Product on Store Shelves.” Entrepreneur, 30 Dec. 2013, www.entrepreneur.com/article/230557.
Otar, Chad. “Council Post: What Percentage Of Small Businesses Fail — And How Can You Avoid Being One Of Them?” Forbes, Forbes Magazine, 21 Aug. 2019, www.forbes.com/sites/forbesfinancecouncil/2018/10/25/what-percentage-of-small-businesses-fail-and-how-can-you-avoid-being-one-of-them/.
Prince, Samantha. “About This Book.” Entrepreneurship Law Company Creation, psu.pb.unizin.org/expsk909/front-matter/about-this-book/.
“Trademarks.” United States Patent and Trademark Office – An Agency of the Department of Commerce, 27 Jan. 2021, www.uspto.gov/trademarks.
“Words Picture: Free Photograph: Photos Public Domain.” Words Picture | Free Photograph | Photos Public Domain, www.photos-public-domain.com/2011/09/22/words/.
About the Author: Anne is from a big family in the very small town of Meadowview in Southwest Virginia. Now in her third year as law student at Penn State Dickinson Law, she is currently studying to be an attorney and will graduate with a JD and certificate in Health Law May 2021.
Anne,
Great job on your blog post! I really loved how you started off the blog post. I always enjoy a blog post with a little humor! It made it easy to read and very intriguing. This post was very well written and informative for not only people who are thinking about starting a company, but also, for those who already have a company. These 10 steps are crucial for entrepreneurs. Thanks for a great post!
First off, why do I still feel the need to spell check entrepreneur? Such a good intro. The way that you condensed and presented the information was easy to understand. I also love when the information in a blog post leaves me with tools to take action steps. Any one of these steps could serve as a helpful catalyst for an entrepreneur to get moving on their business ideas.
Anne,
This was a terrific blog post. You did an excellent job making the information digestible and interesting. I think this post does a great job providing an entrepreneur with the basics associated with starting a business. Keep up the good work!