Legal Issues When Starting a Company

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 How Difficult is it to Start a Company?

When you plan to start a business, it’s important to spend time researching the legal aspects of your industry. The United States has legal restrictions and regulations for businesses. Violations of those laws can result in fines, penalties, the closure of your business, or a jail sentence.

Starting a company is not necessarily difficult, but it does require some understanding of basic business law. For instance, most people know what a corporation is, but many people don’t know that there are different types of corporations, such as limited liability corporations. Choosing the right form for a company is probably one of the major steps when starting a company.

Another thing to consider is that it is not always necessary to start a business “from scratch.” For some, starting a company can involve an expansion of an already functioning company. Others opt to form a “startup company,” an organization seeking to create or enter new markets.

What Are Common Legal Issues When Starting a Company?

There are four common legal issues that you might face when starting a company:

  1. Filing Requirements: One of the main legal issues to consider when starting a company is making sure that all the documents are properly prepared. These can include:
      • Articles of incorporation
      • Bylaws
      • Proof of filing with the state
      • Other forms regarding your tax status

    While not necessarily a direct “legal issue” per se, errors in a filing document can cause major problems in the long run.

  2. Intellectual Property: Another legal issue is protected information, i.e., copyrights and trademarks. Especially if you’re starting a brand new company, it takes much research to make sure that you aren’t naming your organization or your products in a way that might lead to an infringement case. This type of search often requires the assistance of a lawyer.
  3. Employee Screening and Conflicts of Interest: Conflicts of interest can also present legal issues when starting a company. You should thoroughly review any candidate for employment to ensure that they won’t have competing interests with your company. This is especially true for persons who will be serving on a board of directors.
  4. Financial Structure and Contracts: There may be many other related issues when starting a company, such as tax issues, debt agreements, business contract issues, and others. The main thing is to have a comprehensive plan for launching the business (one that covers several years into the future).

How Do I Decide on a Business Structure?

Before anything else, you should decide on a business structure. Every business is different. Determine the most suitable business structure for your purpose. You may wish to register your business as a corporation, S-corporation, partnership, limited partnership, limited liability company (LLC), or sole proprietorship.

Each business structure provides a different tax structure, so you’ll need to find out which structure is most beneficial to you and your business. Keep in mind that the business structure you choose will determine the amount of business liability you have.

How Do I Decide on a Business Name?

Customers will identify your products and services by your business name. By choosing a wise, original, catchy business name, your customers will be able to find your business easily. You will need to make sure that your name does not already belong to another company. After you have decided on your business name, conduct a name search.

If your business name has not already been taken by another business, it means that you can reserve the name. Next, you can prepare your articles of organization, articles of incorporation, or your partnership agreement, depending on which business structure you selected.

What is a Business License?

To operate a business legally, you need to obtain a business license and a tax registration. Licenses and permits are required based on the nature of your business. If you operate a food business, you are required to get a retail food license, bakery license, eat license, alcohol license, distributors license, or any other license relevant to the scope of your business.

Check with your local authorities to find out what types of licenses you’ll need to run your business.

What is a Non-Disclosure Agreement?

Business relationships rely on confidentiality. Whether you’re contracting with a supplier or arranging a financial agreement, non-disclosure agreements are used to protect your business in its dealings with outside companies.

Non-disclosure agreements protect sensitive information about your projects. It’s important to have non-disclosure agreements readily available when working with other companies.

What Do I Need to Know About Zoning?

Make sure your location is in the proper zone by checking with your local authorities. Some people assume that their zoning is appropriate because other businesses operate in the same area, but those businesses may have received an exemption to operate in that location. Familiarize yourself with the zoning laws in your area.

How Can Legal Issues Be Avoided When Starting a Company?

One of the main protections against legal issues actually has to do with the company’s bylaws. These should state what should happen if legal issues should arise (such as when a lawsuit can or can’t be filed). If the bylaws and other company policies are written very poorly, the company is opening itself up to legal liabilities. However, if the policies are clear and comprehensive, there is less chance that a legal dispute will lead to actual liability.

If a legal dispute does arise, it may become necessary to file a lawsuit. This may often need to be filed against an individual person or against a group of individuals since the company might not officially be registered yet. Remedies might include a damages award or a court order requiring a return of property that was donated to the company. These all depend on the individual issue and conflict at hand.

Do I Need a Lawyer for Help with Starting a Company?

Whether starting a smaller or a relatively larger company, hiring a business lawyer for assistance is generally standard procedure. Your attorney can help review your company’s documents and policies to ensure that you won’t run against unnecessary legal issues in the future. Also, your lawyer can represent you in court if you need to file a lawsuit regarding any business matters.

Starting a business can be difficult. You are accountable for the day-to-day operations of your business. You’ll want to be fully informed and prepared for any legal issues that you may face. Brand promotion, handling customer complaints, marketing strategies, cash flow, and any other legal formalities can be handled by a business lawyer. Since there are a number of situations where you may require legal advice, especially on legal issues for businesses, it is wise to hire a business lawyer early on.

A business lawyer will become even more crucial as your business expands. When you start managing more situations on a day-to-day basis, hiring a business lawyer who can confidently handle the legal proceedings for you is a good use of your resources.

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