Some entrepreneurs as SO excited about their idea that they forget to take care of some basics: the legal side of business. This article will outline some business law basics you need to address in your startup, but is by no means exhaustive or a substitute for a visit with an attorney. Here are 3 vital steps your startup needs to take right away.
# 1 – File your LLC (Limited Liability Company)(or other business entity)
There are many different business entities that could choose from. Here is a short guide from the Small Business Administration that is very helpful to choosing what is best for you (https://www.sba.gov/starting-business/choose-your-business-structure). Most of our clients are in an LLC business entity, which we find is the most advantageous organization for small businesses. It is a very easy organization to create, and as the name suggests, it creates limited liability for members of the organization.
To get started, head to the Secretary of State webpage and start a registration. For Oregon, here is the webpage. You will be required to choose a business name, file Articles of Organization (there are usually templates easily available for your state), and pay a small fee (It is $100 in Oregon per year.) Other states, businesses are required to file an Operating Agreement, obtain permits or licenses in your locality, and announce your business. Check here for more information: https://www.sba.gov/starting-business/choose-your-business-structure/limited-liability-company
# 2 – Obtain and EIN (Employee Identification Number)
For an LLC, most business paperwork for your startup needs to be completed in the state you operate. Generally, businesses need to file for an EIN. Some may refer to this as the Federal Tax ID. The EIN needs to be completed at the IRS webpage, and is available instantly. You can see that page here: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employer-ID-Numbers-EINs This number should be completed after you file your state LLC/business entity paperwork.
# 3 – Intellectual Property (IP) protections
If your company has a unique or ”novel” business name, logo or idea, it is usually a good idea to file for Intellectual Property protection. This is where contacting an attorney is REALLY good idea. In quick review, there are four main categories of IP protection: Patents, Copyrights, Trademarks, and Trade Secrets. Under each of these categories, there are many sub-categories of protection. We highly recommend researching http://www.uspto.gov/ for more information on what protections are available with you.
# 4 – Contracts! (Bonus!)
It is very wise to have contracts with all parties your startup works with, even if those people are family or friends. Having a document with clear expectations, and compensation, easily accessible and available empowers each party in any business deal. There are a significant amount of templates and online resources available to startup companies with varying price ranges. We find working with a local attorney for these matters is well worth the time savings of doing documentation on our own. Some people like to do “old school” or “hand shake” business deals, and might be offended by contracts, but we find that the transparency and up-front clarity sets smart boundaries for dates, tasks and payment.
We hope this guide has been helpful to your startup. These three simple steps can help setup your business for long-term success! It will also help you keep expenses and profits separate, so you can “write-off” business expenses, and make your CPA happy.
Check back soon for the same guide for non-profit startups.
Reminder: This article is not a substitute for legal advice or counsel. We recommend you contact a local attorney for any business law related questions!