So you’re an up-and-coming entrepreneur, you have ideas flowing out of your brain that are ready to burst into action. But where do you get started? You recognize that there are legal and financial requirements needed to get your ideas out of your head and into the world. That said, you’re an entrepreneur, not an attorney. Nobody expects you to be a legal expert, but you will need one on your side to get yourself started.
Gaining the input of a legal professional is a great way to get your business ventures started. The support of a legal expert can help you gain the peace of mind that your business is safe and protected from legal action. Correctly incorporating your business and building protocols around the processes of your business mean the difference between chaos and smooth sailing as your business grows.
Is it legal?
The first step in starting your business is to determine if your idea is legal. I’m sure the first person to open an axe-throwing recreation center had quite a few questions to answer. Soliciting the support of legal counsel can help ensure that you are made aware of any and all regulations that may determine how and if you are able to legally operate your intended business. While legal support in this stage isn’t necessary, a legal professional can help identify regulations that you may not have otherwise been aware of before starting your business.
Who are your founders?
This question may seem easy to answer: I’m the founder. While it may be simple to identify the initial founder(s) of your business, it gets more complicated when you begin to bring in early employees. While the true founders might be you and your co-founder(s), it’s important to distinguish who is officially a founding member of the partnership and who are employees.
Team members’ employment status will not only determine their official title, but also their pay scale, responsibilities, and potentially, their share of the company earnings. While not always the case, sometimes business owners will choose to include early employees in the financial wins of the company as it grows. If founders decide to facilitate such transactions, the details of such should be determined at the forefront of the business venture.
Form a legal entity
Once you have your initial ducks in a row, you’re ready to start the process of establishing a legal entity. There are different types of legal entities that are available to you, it’s simply a matter of determining which is the best option for your business. Whether it be a corporation, sole proprietorship, or LLC, each has various pros and cons to consider when determining which to pursue. We’ve laid out all the facts you need to know here.
Determine where you’ll get your funding
The initial funding needed to get your business started is known as seed funding. Seed money is needed to pay for equipment, early employees, inventory, legal fees, etc. There are various ways that business owners might obtain these funds. Some options may include personal financing, financing from a family member or friend, or applying for a loan, either by traditional or alternative funding sources. You should ensure that you secure enough seed money to cover the expenses of your business until it turns profitable.
Draft formal business agreements
As you establish details between co-founders and employees, it’s important to ensure proper documentation of all contracts. Bringing any additional partners into the equation of your business development can lead to potential issues down the line if the partnerships are not laid out in detail beforehand. Details for co-founder agreements should include personal share percentages, business role, compensation packages, and potential future exit strategies. Employee details should include compensation and benefits, terms of employment, and grounds for termination.
Determine how to you need to protect your business
There are various types of business insurance that may or may not apply to your business. The details of your business size, type, and functionality may help you decide which are a good fit for your business. Getting insurance coverage for your business is critical to protect your physical assets such as your business’s building, property, and employees.
It is also important to ensure all intellectual property is protected. If your business functions based on a trade secret or intellectual property, you need to ensure it’s protected with a trademark, copyright, or patent where applicable. Speaking with a legal professional can help you get this done quickly and right off the bat when building your business. By registering your intellectual property, you are declaring ownership of your business, and it may be a helpful step in gaining startup capital.
As an entrepreneur, taking the step to officially start your business is an exciting one, but a big one. It’s critical to ensure that you have more than just a big idea under your belt when starting down the path to officially starting your business. Gaining the support of a legal professional can help ensure that you don’t miss any critical steps in the process of establishing your new business venture. For more information and support, contact our team of legal professionals at @VirtualCounsel.