Top 10 Small Business Startup Legal Questions Answered

Entrepreneurship, the final frontier: these may not be the voyages of any starship on a trek with communicators strikingly resembling today’s cell phones, but it is most definitely an adventure laced with thrills, spills, triumphs and tribulation. Indeed, starting your own business can be scary. Is the nail-biting scare of pursuing that American Dream worth it, though? I believe it is. There are, however, ten other questions you might have when it comes to starting your own business, starting with….

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image courtesy of Robert Scoble/ creative commons


Business Licenses: Do I need Them?

I just have one word for you: research. The reason for that is because that’s no easy answer. Requirements differ from state to state, so simply contact your state’s office of the Secretary of State. Typically, the information you need may even be on the website. Otherwise, make a call and get the information you need. Whatever the case, if you need a business license, be sure you have it.


What About Capital?

You’re dabbling in a messy situation if you have to use a personal checking account of your own to help fun the starting up of your business. Why? Creditors and courts can target you and your finances. That’s why it’s typically a good idea to have a separate financial account designated for your business. Keep your personal money separate from the corporate money. Of course, consult with a quality business attorney for more feedback.


Legal Compliance: How Do I Make Sure I’ve Covered All My Bases?

Wipe your brow, because you’re going to be working hard to even get your business started. It’s all about legal paperwork. Yes, you have to ensure that your operations are not only licensed, but legally compliant with certain local and/or national regulations. Take, for instance, the culinary industry, where you’ll need to ensure that food inspectors are quite happy with the quality of care in your kitchen. If one official notices one cockroach, your business is dead in the water.


Does It Matter What Type of Business I’m Registering?

Oh, most definitely. Everyone’s business situation varies. So consider your options. You can choose a sole proprietorship, partnership, LLC or S corporation. Bear in mind, though, that each comes with its advantages — and disadvantages. For instance: if you just want to be a sole proprietorship, understand that form of business applies to a single person, and you would be solely responsible for any debts, complaints, suits or any other dilemmas facing a business. An LLC or S corporation, however, offers the benefit of keeping your personal assets separate from the business. Pick your passion (or poison).


Now That We’re on the Subject: What’s Best, an LLC or S Corporation?

Many people are quite confused at that and can’t seem to figure out the difference. The fact is this: an LLC (limited liability company) is nothing more than an S corporation, only with more structural flexibility. The same liability protection is offered, except taxes are paid throughout for corporations. The LLC, though, only requires the actual owners to pay those taxes.

Take for instance a single-man operation: maybe you work as the accountant, the human resources specialist, the salesperson and the actual CEO. Choose an LLC format, and you’ll pay taxes just once as the owner. As an S corporation, though, you’ll be paying taxes multiple times! So I repeat: consider your options.


Wait, You Didn’t Address “Partnerships.” What Are Those?

They’re very much like proprietorships, really. The only difference is you have two (sometimes more) entities involved. Hence the term: partnership. It’s legally unincorporated, though, so quite frankly there’s not a whole lot of liability protection involved. However, it’s a good idea to form your own partnership agreement with stipulations; of course, have a business lawyer review the document to make sure everything is kosher. Oftentimes you’d register the partnership with the IRS, your county and state as a DBA, which basically stands for “Doing Business As.”


Don’t I Get Paid for My Own Business?

One would think so, yes. It’s not as cut and dry as you would think, though. Owning your own business really isn’t your own personal checking account. That means you really shouldn’t simply get your dues out of the company funds, whatever they may be. Legally, that’s playing with fire. As the owner, you’re responsible for certain duties that you can then ensure they’re itemized on an actual paycheck just for you — it needs to, however, come out of the business revenue account and not out of the profits. Even as the CEO, that can be considered stealing.


Cover Your Trademark, Patent and Copyright Bases

Do you have any idea how many businesses out there even operate within a town or city? Literally dozens. Quite frankly, you can’t even consider only the local geographics. You have to look at the entire United States. Why? You could be held liable for taking a business name sounding remarkably similar to another business name even if you were never aware of that other business!

Facing that cease and desist order, and possibly a lawsuit, can be financially exhausting — and the fact is you had no idea, no intentions of stealing someone else’s trademark, patent or copyright. Therefore, please make it a point to do some basic research with the USPTO, ensuring that you’re good to go on all your names, images and copyrighted content.


Speaking of Trademarks, Patents and Copyrights: What About Protecting My Own?

It’s important to know the difference between the three, just so you know. Patents apply to specific products of some kind. You can patent a revolutionary automatic toe clipper, for instance, just as long as a similar product doesn’t already exist in the market. As for trademarks, ensure that the label or name of that toe clipper is the only name of its kind in the market. The copyright, of course, would be, for instance, the instructional manual of that toe clipper, and any marketing brochures to go with it. Typically, content is copyrighted the moment you or any of your associates write it. It’s still always good to legally set it in stone with the USPTO.


Do I Really Need My Own Attorney?

It would seem that you don’t given how much valuable assistance I’m providing in this article piece. The fact, though, is you really do. There’s a lot of paperwork, a lot of procedure and a lot of red tape to review, ensuring you’re not going over your boundaries or stepping into uncharted territories.

Don’t get me wrong, though: you may not need a high-profile attorney charging an arm and a leg for something as simple as filing a form. Oftentimes just the legal advice and proper resources are enough to ensure that you, yourself, are going the right direction with your business. Many lawyers, in fact, offer free consultations and advice about what you need to do with starting up your business, where you need to go to get all the correct forms and when and where you need to file them.


It’s All About Doing Your Homework

You thought you were out of school. The truth is you’re always in school. True entrepreneurship, the heart and soul of the nation, is all about learning, studying, researching and implementing all you’ve assimilated to perfection.

Understand that there will always be more questions to ask about getting your business going. These are just the initial ten. When you have more, take initiative and find the answers. They’re there. They’re available. To really attain success, all it takes is the will and desire to seek those answers. When you do, the rest is all downhill.

Matt is the co-founder and CEO of UpCounsel, the easiest way to get amazing legal services. You can follow him and his startup advice on twitter @UpCounsel.

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