Being a visionary is not for the weary. I can certainly attest to that. But now that you have or will cross over to the entrepreneurial world, there are some foundational legal steps you should take to ensure you are legally protected and compliant:
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Select a Business Name
An imperative strategic-planning step for any entrepreneur is selecting a business name and determining whether you want to brand the company under its official business name or something different (a.k.a, “trade name” “d/b/a” or “fictitious name”). As you may have gathered by now, it’s not as easy as it sounds. A business name should be unique and reflective of what you want your products and/or services to represent.
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Select a Business Type
Once you’ve nailed down a business name, you’ll want to select a business type. This could be a sole proprietorship, LLC, Corporation, or Non-Profit. If you have questions about how they compare, schedule a consultation with WedLawk.
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Select a State of Formation
After you’ve decided what business type best fits your business needs, you’ll next want to decide in which state you’d like to register your company. Generally, you will want to file your business in the U.S. state in which it is headquartered. If you plan to transact business in more than one state, you may need to register as a foreign entity in each additional state. Each state is different so be sure to check state-specific requirements or contact WedLawk with questions.
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Conduct Trademark/Copyright Search
This step could be combined with selecting a business name. Before you register your business, you’ll need to conduct a trademark/copyright search on a federal and state level to see if your desired business/trade name infringes on someone else’s. If it does, then you need to go back to the drawing board. It sucks, I know. But better now than later. Trust me. You can attempt to do the search yourself, but it is advisable to consult with an intellectual property attorney. Oft-times, the common-law sources are overlooked. Whether you DIY or use an attorney, do this before you spend a ton of time and money branding your business.
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Register Your Business
Assuming your business name is in the clear, register your business with the state in which it will be formed; include any fictitious or assumed names (a.k.a “d/b/a”). If you need help with registering, WedLawk offers to purchase a DIY Registration Guide for all U.S. states. Each Guide takes you through step-by-step the official registration process in your state and includes all necessary embedded links, post-registration requirements, and additional useful resources.
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Register Your Trademarks and/or Copyrights
This step could be combined with registering your business. Assuming your trademarks and/or copyrights don’t infringe on someone else’s work, register them as soon as possible. This will ensure your brand is legally protected. You can register these DIYs, but we generally advise against it. While it can be cheaper in the beginning, it can cost a lot more in the long run due to potential opposition and other possible issues after you apply for registration.
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Establish Governing Documents and other important business documents
You’ve officially registered your business, awesome! Now you need to establish an operating agreement, corporate bylaws, partnership agreement, or whatever other type of governing document you need for your business type (“Governing Document”). The Governing Document outlines the terms for operating and managing your business in a manner that complies with your business’ legal obligations—i.e. voting, meetings, documenting meetings, decision-making of the shareholders and directors (corporations); members and managers (LLCs); and partners (partnerships).
You should also establish the following:
- Company Book: This is usually a 3-ring binder with an index and corresponding tabs. Some of my clients opt to save them to their computers. Whichever you choose, just make sure the company records are easily accessible and well organized.
- Company Records: All startups (except sole proprietorships) need the following, at a minimum. As the business grows and begins to enter into larger transactions, the company records will likely expand.
- Certificate of Formation+ any amendments + dba’s (if any)
- Foreign Registration Certificate(s) (if any) + all amendments
- Operating Agreement (LLCs)/Bylaws (Corporations)/Partnership Agreement (Partnerships)
- Membership Interest Certificate (LLCs)/ Stock Certificate (Corporation)/ Partnership Certificate (Partnerships)
- Membership Interest Ledger (LLCs)/Stock Ledger (Corporations)/ Partnership Ledger (Partnerships)
- Business Licenses (if any)
- Bank Account Information
- IRS Filings
- Annual Reports + Other Documents filed w/ State
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obtain an ein
As soon as you register your business, you should apply for your Employer Identification Number (EIN). It’s free and a very simple process. You need an EIN to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits.
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open business banking accounts
Once you have registered your business, established an operating agreement/bylaws/partnership agreement, and obtained an EIN, then you need to take those documents to a bank of your choice (I recommend researching local banks in your area to see what benefits they offer for small business owners) and open a business banking account. As a registered business, the business should have its own business banking account, as its owners are legally prohibited from commingling funds.
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Apply for a business license(s)
Check your state laws to see if your business is required to have a business license. Usually, this information is found on your state’s Secretary of State’s page. You can also find this information on sba.gov.
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Establish Written Agreements
If you are a small business owner, you either sell products or services. In either case, it is critical to establish written products/services/IP licensing agreements, etc., rather than taking someone’s word for it. You never know if/when something will go wrong. That’s why you should have in place written agreements that spell out the exact terms and conditions for those engaging your business.
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Establish an Employee Handbook and Employment Agreements
As your business grows, you will likely need to hire additional help. Some small business owners hire employees and others use independent contractors (“IC”)—that decision is totally up to you. If you do hire an IC, make sure you have an independent contractor agreement in place. While it is not bulletproof, it can help you prove your case if, for example, an IC sues you for unpaid wages. Yes, it happens, and they will argue that you misclassified them as an IC when you controlled them like an employee. More to come on that topic.
You may also want to consider incorporating employment agreements. Depending on what industry you’re in and the position you’re hiring for, you may need employment agreements, particularly where a candidate will work with your proprietary and confidential trade secret information (financial information, formulas, designs, recipes, source codes, etc.)
Last, a growing business has more legal compliance requirements—i.e, anti-discrimination laws, workers’ compensation, retaliation, OSHA, etc. It is important that you have an understanding of these laws and ensure that they are incorporated within your company culture. This is usually done through training and the implementation of an Employee Handbook.
Hopefully, you now have a better understanding of what you need to get your business legally up and running, what we call #LawkdIn&Legal. If you have any questions, feel free to contact WedLawk. We’re happy to help.
Emily E.G. Bradford
Emily is a business, IP, and employment lawyer based in Houston, TX. She has over 5 years of experience working with a variety of businesses in Texas and throughout the U.S. She previously served as the Managing Editor of Oklahoma City University School of Law’s Law Review and was named to the Texas Super Lawyers list of Rising Stars for 2022. No more than 2.5 percent of the young lawyers in Texas are selected to receive the Rising Stars honor.
As the founder of WedLawk, and being an entrepreneur herself, she is especially passionate about helping startups succeed. To learn more about Emily, visit the “About” page.