Starting a business is an exciting time of life! You get to be your own boss, make your own hours, decide how you want your business to grow...and you are responsible for all of those decisions as well. That's where advisors come in: attorneys, tax professionals, investment advisors, and so on. Our job is to help our clients be informed so that they can make the best decision for their business.
Starting out: what form of business do you need?
One of the first questions an entrepreneur should ask is:
What business entity should I use?
There are three entities to choose from: a sole proprietorship, a limited liability company (LLC), or a corporation (C-corp or S-corp).
- Sole proprietorship: not typically recommended for entrepreneurs. In a sole proprietorship, there is nothing between the entrepreneur and their clients or the greater business world. This means that all assets - business and personal - are on the line if something goes wrong with the business.
- LLC: the sky is the limit. An LLC offers asset protection for personal assets as well as some structure, without being as complex as a corporation. There are also some tax benefits to being an LLC.
- Corporation: more restrictions, potentially more benefits for employees. As a business grows and wants to offer stock or other incentives, a corporation becomes the entity best suited to meet those goals. Starting out, a corporation might be too complex because there are significant statutory restrictions on how a corporation operates.
Protecting your business and your brand: intellectual property
Intellectual property isn't always about patents and code and technology. It can be as basic as your business's name and logo. In order to build a business, it's important to understand "branding" and how to develop your brand: how the world sees you. Part of your brand is you business name and your logo. These are also important assets of your business. In order to protect these assets, you may want to consider trademarking your name and logo. There are certain requirements that must be met to trademark, such as originality, so take that into consideration when developing your brand.
Ah, money. One of the trickiest points for entrepreneurs. You can have a great idea and a great team, but without the money to start and continue, you won't get very far. Business owners should develop a good budget as part of their business plan to give them a realistic sense of where they are, where they want to go, and how they will get there. Professional advisors help entrepreneurs develop budgets by managing expectations and helping the entrepreneur determine what they really need and what they can afford.
I have to say this: don't mistake your Google search for my law degree. Online templates are, at best, middle of the road documents that might be sufficient to get your business barely off the ground. Drafting effective documents is more of an art than a science. The documents should be individualized to your business or your transaction. A form document simply won't provide that individualization. An attorney can look at your business and craft a document that addresses your concerns and furthers your goals much better than an algorithm could ever do.
Common and avoidable mistakes
Not using proper documents. There, I said it again. A personalized document, drafted by an attorney, is going to be much stronger than something found online.
Choosing the wrong partners. Business partners can be a great asset or a great liability. When selecting someone to work with, consider the following:
- Do you share a vision for the business?
- Do you have good rapport?
- Are you equally committed to the business venture?
If the answer is no to any of these questions, consider seeking out other partners. It's nothing personal - it's just good business.
Not communicating with your advisors. Advisors can only help with issues or questions they know about. Let your advisors know what keeps you up at night and where your concerns are. They will be better situated to help you if they know what's going on.