by William Murphy
Thorough preparation is important when planning your business. Part of your business plan should include limiting your personal legal exposure as well as that of your business. Involving a lawyer during the planning stage could save you hassles and money later on. The following is a run down on some of the legal issues you can plan for before you start your business.
Choosing whether or not to incorporate or form a limited liability company for your business is one of the most important business decisions you need to make. If your business is not in one of these two structures, you will be subject to personal liability for the debts of your business. This means that your personal losses could exceed your investment in the business. With a corporation or limited liability company, your losses are limited to the amount of your investment in the business. If your business is one that involves potential liability, you should strongly consider forming either a corporation or limited liability company.
If you decide you don't need the protection of a corporation or limited liability company, and instead will operate your business as a partnership with others, you will need a written partnership agreement. This will cover the rights and responsibilities of all of the parties, as well as addressing in advance several "what if" scenarios.
Do you expect your business to be successful because you have some new product that no one else does? Or do you have a better way of doing things than your competitors? Do you have some special knowledge that makes you better than the competition? If you have any of these things going for your business, you need to protect them or you may find that your competitors are using your competitive edge. Get a patent to protect any inventions or new processes that your business will use. You may want to trademark the unique name of your business or products as well. As for that special know how, that is considered a trade secret. You'll want to implement plans to protect any trade secrets as well.
If you will be hiring employees, you should think carefully about the terms of their employment. Will they be at-will employees, who can quit or be fired at anytime? Or do you want an employment contract to make sure that a key person works for you for at least a minimum period of time? You also need to think about confidentiality agreements and non-compete agreements with your employees to keep them from telling the competition your business secrets or going to work for a competitor. You will also want to think about confidentiality and non-disclosure agreements with other people your business comes into contact with. You don't want the person you're trying to bring on as an investor to take your business idea for his own. As for other contracts, think about how big of an impact the contract will have on your business. The bigger the impact of the contract, the more important it becomes to have your lawyer participate in its negotiation.
These are just a few of the legal issues you should address before you start doing business. A lawyer who practices in the area of business law can help you with these and many others.