Four Crucial Steps to Make your Small Business Legal

What’s on your mind? Money most likely. Or maybe it’s “How am I going to fill that order for the new client I just landed?” Handling your small...

Last Update: June 6, 2015

What’s on your mind? Money most likely. Or maybe it’s “How am I going to fill that order for the new client I just landed?” Handling your small business’ legal affairs is probably not in the forefront of your mind.

When you start a new business the concerns of obtaining clients and creating revenue take over but it is also very important to make sure your legal needs are covered. Why? Because you want to protect the revenue stream you’re building in your business, save money on taxes and prevent others from stealing your sweat equity by copycatting your brand.

So, here are four crucial steps that you’ll want to take in the very near future to make your business legal:


Form the Right Entity for Your Business

Whether or not you’ve formally formed a business entity, you do have one. Sole proprietorships spring into being, without filing any legal documents, the moment you start selling something. General Partnerships also launch when one or more persons begin working on a business together.

There are a myriad of pluses and minuses attached to each business entity which may include: increased or lowered taxes, shielding of your personal assets from creditors and even your partner’s ability to acquire debt in your name. This is not something that a quick visit to Legal Zoom can fix. You will want to consult with your attorney and accountant to determine which entity is the best fit for you and your business. And if you are operating as a sole proprietor, please get some business insurance asap!


Comply with Local Licensing Requirements

Whether you operate a consulting firm out of your apartment or sell handcrafted jewelry online, you need to know what actions your state and city governments require of you to “make it legal.” For example, if you operate a store on EBay, California state requires you to have a retail sales license. In New York, marketing agencies may be required to obtain a certificate of authority to collect sales tax. Check out local requirements for businesses in your state, town or city.


Contracts and Rachel’s Rule of Thumb

Here’s my rule of thumb that will protect your business from all manner of headaches, financial loss, emotional distress and yes, lawsuits: Have a contract for every single relationship your business enters into. You and your buddy have decided to start a new business? Great! Create a contract that governs that relationship.

Selling your new widgets in that new widget store up the street? Draft an agreement between you and the widget store owner. Setting up a website to advertise and sell your services? Develop a privacy policy and terms and conditions to govern your relationship with people who visit your website. Don’t just use the first template that turns up in a Google search. Make sure you customize your contracts to actually fit your business.

I highly recommend having an attorney on your dream team to draft all the different contracts your business needs. However, if you insist on DIY’ing your legal services, take off the rose-colored glasses that all of us entrepreneurs wear daily and try to imagine everything that could go wrong with every transaction in your business. Then draft a contract that protects you in all of those situations.


Protect Your Unique Brand

Would you be dismayed to discover another business that does exactly what your business does and is using a logo, name or slogan that is dangerously similar to yours? If so, you’ll want to protect your brand and the “good will” that goes along with it by registering trademarks for your business name, logo and slogan.

This involves filing a trademark application with the USPTO’s Office and responding to their inevitable attempts to narrow your trademark protection. Once your trademark is established you’ll want to police your mark to ensure that unauthorized persons are not using it by setting up a regular Google search and through the use of non-disclosure and licensing agreements. If you don’t prevent others from using your trademark, you could lose it.

Now, I know I just added a myriad of complex things to your To-Do list but you’ll sleep better knowing you’ve covered your bases. And with the advent of lawyers operating Virtual Law Offices, making it legal has never been more accessible or affordable. So hire an attorney and “get ‘er done,” so you can get back to doing what you do best!


Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect.  No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  YFS Magazine expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this post.


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