Are you among the 75% of small business owners who are concerned about being the target of a lawsuit that puts your entire business in jeopardy? You should be; small business owners spend millions of dollars out of pocket on legal cost every year. The Klemm Analysis Group estimates that perhaps as many as 52 percent of all civil lawsuits target small businesses like yours. As a business owner, it's your responsibility to do everything within your means to limit risk and to keep the business running smoothly. It is my pleasure to help you do just that.
Related Post: Own your business, don’t let it own you
Its All About Risk
When I am coaching startups and exsisting businesses the most asked question is usually how soon should I legally protect my business and how cheap can I do it because funds are limited. Before I offer my two cents, please understand I am not a CPA or a Lawyer and I will not give you direct legal or accountant advice. The best thing for you to do is to consult professionals. However I can tell you what I have done and seen done. Your first priority as a startup or small business is solving a problem for your clients in exchange for money required to operate your business. Once you make that exchange, you are accepting risk; especially from a legal stand point. The more risk you are exposed to, the more you need to fund your legal protection and the sooner you need to do it. Let's go through a checklist that may help you understand this a little better.
"If you really want to do something, you'll find a way. If you don't, you'll find an excuse." - Jim Rohn
Risk Assessment Checklist
- Corporate Name Search - Your company name is a critical brand asset and the first impression your clients will get about your corporation. Once you know your corporate name is available, its time to claim it. If you are not ready to officially claim the name your can reserve it, or put it on hold with your secretary of state. The best way to protect your name and associated intellectual property is to register a trademark with the USPTO (United States Patent and Trademark Office).
- Choosing a Business Structure - The most basic level of legal protection is to separate your business from yourself with a DBA (Doing Business As), LLC (Limited Liability Company), S-Corporation, C-Corporation, or Non-profit organization. After consulting with professionals about which entity to file for, your company will be registered with your secretary of state and you will get your Federal Tax ID number.
- Business Licenses or permits - Some businesses require a license or permit on a state or federal level in order to operate your business. Such license requirements are not always obvious and the penalties can close your business regardless if you knew about the requirement or not. These requirements are subject to change every year so there may be a license you need to obtain this year that you didn't the prior year. This is another important reason you want to consult professionals who stay on top of such regulations for you.
- Business Compliance - Based on the entity you filed with the secretary of state, you are required to complete tasks in order to keep the legal protection of the entity. The complexity of your compliance can vary but the most simple and paramount of which is a separate bank account and transaction exclusive to your business. Failure to remain compliant can open you up to legal risk of both the business and your personal assets.
- Employee Laws - For anyone involved in the business, including yourself, self-contractors, partners, or W2 employees, you must adhere to federal and state legal obligations. Theses include but are not limited to anti-discrimination laws, withholding and payroll taxes, unemployment insurance, workers' compensation, and wage requirements. In my opinion, you should never employ anyone without consulting professionals.
The professionals I recommend
CorpNet has an amazing platform for protecting your business from startup, to compliance, to close of a company in all 50 states. Nellie Akalp, founder and CEO of CorpNet, is an entrepreneur, small business advocate, and mother of four little rockstars. She has helped more than half a million entrepreneurs start their business. Through CorpNet.com, Nellie has also partnered with business professionals such as attorneys, CPAs and more as their silent fulfillment partner helping them incorporate and form LLCs for their clients. Their trusted team of business filing specialists make sure it's super easy for you to manage your paperwork and stay in compliance. All of your important documents will be stored in one secure location, available even on your mobile phone. This includes; critical information, state documents, corporate bylaws, meeting minutes, and operating agreements. I support their mission to be the smartest, most affordable, reliable, and convenient way to start a business and ensure good standing and corporate compliance. Get your Free Consultation now!
Do it yourself
You can do all of this yourself. All the filing paperwork can be found at your secretary of state with only the direct fees to deal with. Of course you will need to do your homework and discover how to fill out the form properly and to uncover all the requirements you need to perform. From there, in order to avoid lawsuits, you would need to
- Be careful of what you say and do - Avoid any public announcements, direct advice, and obviously physical liability hazards. Also be overly cautious with whom you do business; make sure they are above board.
- Keep yourself separate from the business - Everything you do for the business should be clearly sperate from you personally. This includes separate bank accounts, computers, locations, and other assets whenever possible.
- Consult with a professional on specific tasks - There are things that can only been done by a professional but they usually charge by the hour. That means you can minimize your legal cost by being prepared and only giving them specific tasks.
- Protect your files & emails - Cyber crime is an increasingly bigger problem for small businesses because you may not have the money or knowledge for proper cyber protection. You risk someone taking something from you and or using your information improperly. Either situation can be costly.
"Don't let the fear of losing be greater than the excitement of winning." - Robert Kiyosaki
While you can do most of the legal paperwork yourself, I would not recommend that. Even if you have been running your business for years without incident you may be unknowingly vulnerable to a legal situation that could cost you everything. The best thing you can do to protect the success of your business as soon as possible is listen to the ongoing and direct instructions of professionals your trust. While it can be inconvenient and possibly costly, it is vital to the legal protection of your business. Another reason to go to professionals is to find the loop holes, tax breaks, and other benefits that you may never know about. Check out what my friends at CorpNet have to offer for business formation and compliance. CorpNet also provides FREE or low cost information, resources, and tools such as extremely helpful step by step guides on how to file for corporation, LLC, or DBA. With an 100% satisfaction guarantee and a full-refund available, there is no reason not to get your free consultation.
Are you legally protected? Did you fully understand the information presented? Is there something I left out? Who do you consult on your legal health? If you have any question, comments, or concerns I encourage you to comment below or send me a message at firstname.lastname@example.org. I hope to hear from you soon!
Posts You Might Like
- Beers, Brian. “Don't Get Sued: 5 Tips to Protect Your Small Business.” Investopedia, Investopedia, 4 Sept. 2019, https://www.investopedia.com/small-business/protect-small-business-getting-sued/.
- By. “6 Legal Steps to Starting a Business.” Personal Branding Blog - Stand Out In Your Career, 8 Mar. 2016, https://www.personalbrandingblog.com/6-legal-steps-to-starting-a-business/.
- E., Michelle, et al. “Start a Business, Incorporate, or Form an LLC With Corpnet.” CorpNet, https://www.corpnet.com/.
- “Lawsuits in Small Business.” Practical Business Knowledge, 4 Mar. 2011, https://businesspracticalknowledge.wordpress.com/legal-security/lawsuits-in-small-business/.