Fortunately for residents of the United States, there’s no better place to be an entrepreneur than in the US. Although starting a business doesn’t necessarily require entrepreneurs to incorporate their entities, trademark slogans, and patent proprietary processes, taking all these legal precautions – if applicable to your business, that is – is a step you won’t regret.
Unfortunately for prospective small business founders, affording the services of just one attorney is out of the picture. While these tips don’t serve as a replacement to a lawyer, they’re a good place to start.
Intellectual property – do you know what IP is?
Intellectual property, often shortened to IP in both writing and prose, refers to nontangible creations like recipes or computer software. There are four major types of protections afforded by the laws of most governments: patents, trademarks, copyrights, and trade secrets – and sometimes confidentiality agreements.
Patents are protections of inventions. These inventions can either be tangible or abstract. Trademarks prevent others from copying a business’ catchphrases, symbols, or devices – like Staples’ big, red “Easy” button – used in an entity’s line of business.
Copyrights concern authored works including art, music, and plays. Lastly, the fourth type of intellectual property is trade secrets. Trade secrets are, for example, the formula for Coca-Cola or Kentucky Fried Chicken’s blend of spices, herbs, and seasonings.
Lastly, confidentiality agreements are sometimes protected as IP. For example, assume someone is slated to have surgery on their wrist but has a finger amputated. That person hires a medical malpractice law firm to seek a financial settlement. As part of the settlement he wins, he must sign a confidentiality agreement.
Also known as non-disclosure agreements, these contracts are quite common in the legal world.
The basics of incorporating a business
Entrepreneurs are typically sole proprietors. In other words, their business activities are one with themselves. Sole proprietorships are the most common type of business.
Partnerships are business endeavors owned by at least two people. The more an owner contributes, the greater their stake of ownership is. Just like sole proprietorships, they hold tax benefits and are easy to create. Similarly, owners are liable to be sued.
Limited liability corporations (LLC) separate businesses form their owners. If they go bankrupt, owners’ assets can’t be sought by creditors. Further, LLCs benefit from the tax advantages that partnerships provide.
Corporations pay the highest taxes, though they’re separate from their owners. They can also issue stock, though this is something most small business owners and entrepreneurs won’t have to worry about.
In most cases, LLCs are entrepreneurs’ best bets.
Accounting is important – even more so if you have employees
The Internal Revenue Service (IRS) cares very much about how much money companies in the United States are making. You should always strive to keep accurate records for two reasons: you’ll know where the profitability of your business stands, and the IRS won’t be able to fine you for recordkeeping improprieties.
If you have employees, you’ll be responsible for paying payroll taxes. The IRS is also concerned with how much employees are paid and whether businesses are current on their employment-related taxes.
Create procedures for every foreseeable situation
Protect yourself and eliminate confusion by creating well-defined, thorough procedures to follow in the event of business failure, getting bought out by investors, an owner dying, etc. Without proper procedures being placed into practice before doing business, entrepreneurs are setting themselves up for tons of headaches.