Successful entrepreneurs know just how important developing a business plan is to the growth and sustainability of their business. Oftentimes, new business owners overlook the legal aspects of starting a business. For example, it is not uncommon for some businesses to open without developing solid business contracts, obtaining the right licenses and permits, or knowing what parameters to operate within to avoid being sued.
I strongly recommend new start-up business owners consult with a business attorney prior to the launch of their business. Read on to learn more about the legal aspects of starting a business.
1. Entity Formation
There are several different types of entity structures: sole proprietorship, general partnership, limited liability company, and corporation. Some entity structures, such as general partnerships, require written or verbal agreements (this will depend on your state law) to be drafted between parties in order to be legally established.
Most businesses are formed by a sole proprietor (someone who personally owns and is liable for the business). Running your business as a sole proprietorship may be practical during the first couple of years of operation while your risks are low; however, you should reconsider your entity type at least within 2 to 3 years of launching your business or even earlier if you think there is any potential for liability or start getting serious traction. For example, you may be interested in forming a partnership with another venture, or limiting your exposure to personal liability, or make use of possible tax advantages, in which case you should form a corporation.
2. Licenses and Permits
Depending on the type of goods or services you will be selling, you may need to obtain certain licenses and permits to operate in your local or online. Such licenses may consist of a business license which can be obtained from your local city or state government.
3. Business Contracts
No matter what type of business you form, you will always need business contracts to successfully operate. Common business contracts that should be developed prior to the launch of your business are confidentiality agreements, bill of sale agreements, agreements for the sale of goods, and independent contractor agreements.
I strongly recommend you do not conduct business transactions without having a signed written agreement with the other party detailing terms and conditions of your transaction.
The tips mentioned above are just a few examples of the things you need to consider when reviewing the legal aspects of doing business. You should be proactive in obtaining legal counsel to make sure you are on the right path to success. I hope the tips above helped. Please comment below if you have any questions regarding the legal aspects of starting or running your business.