Starting a new business might be more complicated than you think. I’m Neil Fridman with the Fridman Law Firm PLLC. My firm and I have made it our mission to provide entrepreneurs and small business owners in New York and the surrounding areas with the best legal counsel to help them reach their goals.
Today, I’m going to talk about a few warning signs you should be on the lookout for when you start your business. Let’s start with the proper legal documentation.
Proper legal documentation
Legal documentation is all about protection, and the type of business you are starting has a direct correlation with the type of documentation you need. Every startup kicks off with its own articles of incorporation, which establish the business in one of the 50 states. However, additional documents are typically needed.
A partnership agreement
For example, a partnership agreement dictates the way a business runs and outlines the relationship between the partners. If you are starting a business with a friend or a family member, this document is absolutely crucial to the company’s success and to your own personal relationships.
Other documents such as employment agreements, non-disclosure agreements, and confidentiality agreements, just to name a few, may also be necessary for your business. Each of these documents is designed to protect you and certain aspects of your business. If one is missing, your business is exposed to unnecessary risks.
Trademark clearance search
Once you have the proper legal documentation in place, performing the proper trademark clearance search is a great next step for your business. Google, Apple, and McDonald’s are all businesses we recognize by their trademarks.
By definition, a trademark is a type of intellectual property consisting of a recognizable sign, design, or expression, which differentiates products or services from those of others.
As a new business owner, your responsibility is to make sure your trademark is not associated with any other business that is filed with the USPTO or has other rights to the mark under common law.
This is why you need to perform a trademark clearance search that is in-depth and comprehensive. Confirming that your trademark is clear will allow you to confidently build your brand and company and allow you to register your business name and logo. It will also give you peace of mind.
Your tax strategy
The last warning sign we’re going to look at today deals directly with your tax strategy. As a startup owner, you have to be aware of the potential tax implications of your business. Again the bulk of this conversation will revolve around what type of business you are starting, as your choice of legal entity will also determine how taxes are paid by you, your business partners, and the business itself.
The first step for most startups will be to get a tax ID or an employer identification number from the IRS. But this is only the start. As a business owner, you need to be aware of potential tax incentives that might be available to you as well.
You’re responsible for sales and payroll taxes and the proper way for your business to hire and document any independent contractors that you’re working with. If your business is a corporation, there are also a number of issues regarding stock options that you’ll need to be aware of.
What you should do to protect yourself
Starting your own business is exciting and it’s something that should be celebrated. However, many business owners put things like drafting the appropriate legal documents, trademark clearance searches, and tax planning on the back burner as they rush to get started. Failing to do the proper due diligence on the front end can have massive repercussions on you and your business partners down the road.