As more people pursue entrepreneurship every year, it’s important they conduct their due diligence. They must understand which legal steps to take next. This allows them to protect their small businesses and intellectual property. There are several items all entrepreneurs must be able to cross off their legal to-do list, including covering these key areas:
You’ve drafted a business plan, reviewed the viability of your business idea and accessed how much capital you’ll need to start your business. Now, it’s time to protect your new venture and intellectual property.
1. Incorporate the Business
This is one of the basic, first steps many entrepreneurs take to protect their small businesses. An unincorporated business struggles to establish credibility, and it does not receive liability protection like an incorporated formation. An incorporated business receives liability protection. This allows personal and professional assets to remain separate from each other. It ensures personal assets, like houses and cars, receive protection in the event of an unforeseen circumstance.
Entrepreneurs may choose to incorporate as one of several different types of business structures. Here’s a look at some of the most common, and popular, options available:
- Limited liability company (LLC): This flexible entity may be run as a single-member LLC, member-managed LLC or manager-managed LLC, depending on the number of members (or owners) in the company. Forming an LLC confers liability protection. It gives you the ability to choose if you would like to be taxed as a partnership or corporation.
- Corporation: This entity also provides liability protection. It is less flexible than an LLC. The formal structure of a corporation allows the company to issue shares. You may accept capital from potential investors. Then, you may take the business public with an initial public offering (IPO).
- General partnership: There are several types of partnerships available for entrepreneurs. This includes joint venture and silent partnerships. Many small businesses incorporate as a general partnership. This allows two (or more) partners to run a company. All profits, management duties and liabilities divide equally between the partners. A partnership agreement outlines everyone’s role in the company.
2. File For Trademark Registration
Chances are your small business has a creative word, phrase, logo or design. This mark is likely used to emphasize the uniqueness of your business to the world. However, if it has not been registered as a trademark, a competitor may plagiarize it and pass the mark off as their own.
The easiest way to keep this from happening is to file for trademark registration. Conduct a name search first to ensure your mark’s application is available and is not pending or registered with another company. Then, file a trademark application to register the trademark. Once it has been registered, you alone have exclusive rights to the mark.
3. Obtain Business Licenses
Essentially, a business license ensures you may operate your business legally. Once you have registered, your business license tracks the activities of your company for tax purposes. It ensures the business has met the minimum requirements necessary to protect the public health. A business licenses notifies citizens of activities may impact the public.
Every business is different. Your venture may require business licenses and/or permits specific to its industry. Check with your local Secretary of State. There you will see which licenses and permits your business needs. You may obtain the necessary paperwork to begin the filing process.
4. Apply For An Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a nine-digit number. It acts as your federal tax ID. The IRS issues it to small business. An EIN helps identify and track employer tax accounts after they incorporate their businesses.
Many entrepreneurs assume you only need an EIN when you’re ready to hire employees. Yes, it’s true you need an EIN before you hire and pay employees at your business. However, an EIN does more than ensure you can hire talent. You must file for an EIN if you’d like to open a business bank account or establish a retirement plan.
Additionally, EINs may identify your business on important documents. Typically, entrepreneurs use their Social Security number (SSN). An EIN is less sensitive than an SSN. You may used it when filling out payroll reports and paying federal taxes.
5. Choose a Registered Agent
A registered agent (RA) acts as the point of contact between the business and the state. They accept important documents from the state on your behalf. An RA organizes the paperwork. They deliver it to the business owner in a timely manner for review.
Who can be a registered agent? Entrepreneurs may act as their own RA. Or they may enlist the help of a third-party service. You must meet the following requirements if you decide to be your own registered agent:
- The RA must have a physical street address location. This address must be in the same state as the company’s formation. A P.O. box is not an acceptable form of address.
- A registered agent must be a resident of the state where business is conducted.
- RAs must be available to receive process during general business hours. Typically, this means Monday through Friday from 8 a.m. until 5 p.m.
It’s okay if you find you are unable to meet these requirements. Consider designating a third-party service to act as the registered agent for your business.
6. File Paperwork to Stay In Compliance
Don’t forget from here on out, you will need to pay renewal fees and file annual reports!
Annual reports are easy to fill out. These reports document changes made within your LLC or corporation. For example, an address change would go on an annual report. You may need to pay renewal fees throughout the year. In addition, you will need to update any operating agreements or bylaws within your LLC or corporation. This keeps everyone up to date on changes within your organization. It also allows you to stay in compliance with the state.
Ready to protect your new venture? We can help you get started! Contact us at mycorporation.com or give us a call at 877-692-6772.