What constitutes a small business can vary greatly. In general, a small business is privately owned and operated with less than five hundred employees. They may also be defined by a relatively low volume of sales. Small business standards in the United States vary by state, as well as by industry. Because of their relative ease of operation, and certain tax deductions being made available, small businesses are becoming more popular.
Some other examples of why small businesses are gaining popularity include, but are not limited to:
- The amount of creative flexibility owners are allowed;
- The amount of control over work-life balance;
- Financial independence; and/or
- Starting incentives, such as financing options.
Small businesses typically take the form of a corporation, partnership, or sole proprietorship. Another commonly used term is “startup.” This refers to a business that has recently started operating, and is essentially on a smaller scale until they have earned enough revenue to move forward.
A startup may remain a small business, or they may progress past the criteria for defining small businesses. For manufacturing industries, small businesses are to employ less than five hundred employees; for non-manufacturing industries, the criteria is typically less than $7 million in annual income.
What Things should I Keep in Mind when Starting My Small Business?
There are several advantages to starting your own business, as was previously discussed. However, there are also several things to keep in mind when starting a small business. Some examples include but may not be limited to:
- Research: It is imperative to do your research before starting a small business. This could include things like researching your competition and finding the best suppliers for materials. However, you should also research ways to finance your business, what your state laws are regarding small businesses, and whether you would like to partner with someone or remain independent;
- Licensing: As part of your research, you will likely discover that you need a variety of licenses, permits, and/or registrations in order to conduct your business legally. You should check with your jurisdiction in order to determine what license is required by your state. This step is especially important because failure to meet legal requirements for small businesses could result in penalties, such as fines, jail time, or having your operating privileges revoked. Additionally, licensing requirements can be categorized into federal, state, and local requirements;
- Formation: This refers to what form of business organization your business takes. The most common form is an “LLC,” or limited liability company. The state in which you wish to form your business may also dictate what form that business takes, as well as tax incentives and implications associated with particular forms; and
- Teams and Marketing: You should identify those who will be able to get your business started. This is your team, and they will help you grow your business if you cannot do it alone. Related to your team is your marketing strategy. Solid marketing is what will help your business grow and expand. Your business plan should include a strong marketing plan in order to let people know about your business.
How Do I Finance My Small Business?
Small business financing can take on many forms, and is largely influenced by the type of business being started. According to statistics provided in 2018 by the Office of Advocacy for the United State Small Business Administration, personal and family savings account for the most common source of financing for small businesses. Other common ways of funding and financing small businesses include:
- Obtaining commercial loans;
- Partnering with investors;
- Business credit cards from banks;
- Applying for government programs for small businesses; and
- Crowdsourcing funds, such as through online fundraising platforms.
Government lending programs operate at both the state and federal levels. Such programs intend to reflect the important role small businesses play in strengthening the American economy. Additionally, they are provided to promote the start of new businesses as well as promote the growth of existing small businesses.
What Type of Lawyer Do You Need to Start a Business?
There are several different types of attorneys that could be beneficial in starting a business. Examples include general business attorneys, contract attorneys, and tax attorneys. Local attorneys will be aware of what laws apply to which industries, and what specific licensure you will need to obtain to start your own business.
In terms of the type of attorney most beneficial for starting a business, a business attorney may prove to be the best fit. This is because they are knowledgeable in a variety of topics that will likely apply to your small business. They can help those who are looking to start their own business, or are facing disputes involving their current small business. The attorney can also assist in the following ways:
- Finding applicable tax breaks for your small business;
- Identifying special financing for your specific business;
- Applying for a tax identification number;
- Providing guidance regarding structuring your business in a way that limits your liability; and
- Protecting your intellectual property.
What Does a Small Business Lawyer Do?
Small business attorneys generally handle cases involving:
- Business disputes;
- Issues involving the sale and purchase of stocks, as well as other securities;
- Issues with business property;
- Adhering to business regulations and laws;
- The misuse of protected business information, such as copyrighted and trademarked materials; and
- Interstate and international business issues, such as the transportation of goods.
Other examples of tasks handled by small business attorneys include:
- Assisting with negotiating, drafting, and reviewing business contracts;
- Helping with business startup and incorporating filings;
- Addressing issues related to business termination or transferring; and
- Helping the company shift organizational structure.
Small business owners can reap many benefits from working with a business startup attorney. Mainly, owners will be assured that their business is beginning in a legal manner, and that their interests are being protected.
How Do I Find a Small Business Lawyer?
An attorney referral service, such as LegalMatch, is how most people locate small business lawyers. Such services match you to an attorney in your area based on criteria that you provide. Other means of finding an attorney include an online search, and asking friends and family. No matter how you go about finding an attorney, there are some things to keep in mind:
- How is the attorney credentialed?
- Can they provide client testimonials?
- What is their litigation record?
- Does their fee structure suit your needs?
When Should a Startup Hire a Lawyer?
It may be difficult to properly anticipate legal issues that a startup or small business may face. You should consider hiring an attorney for the following situations:
- Business formation and/or creation;
- Structuring your company;
- Business contracts and transactions;
- Meeting licensing and regulatory guidelines;
- Issues or conflicts with fundings;
- Protecting your ideas by utilizing patents, trademarks, and copyrights;
- General disputes and lawsuits; and
- Dissolving the business, or business succession.
Do I Need a Lawyer to Start a Business?
Consulting a skilled and knowledgeable business startup lawyer can reduce the risk of loss, as well as ensure you are in compliance with all applicable laws. Previous sections have described how an attorney could benefit your small business. Additionally, a business attorney can also represent you in court as needed.