being is business is tough. The statistics show that about half of all new businesses will fail within the first five years. Of those that survive approximately one third of those remaining will fail by the 10th year. A business is a risk not only economically and operational but also in the “fine print”.
1. The failure to organize the business entity to separate the business liabilities from your personal ones. It is very important that even as a sole proprietor you create an LLC or an Inc. This business entity needs to be documented and submitted to the state before you actually open for business.
2. A well drawn up business plan is an essential road map. You may have the biggest, brightest and best new product or service, but without a guide you can get sidetracked very easily. Determine the market (and it is not everyone!), the costs and profitability potential, sufficient cash flow on your own or will you need outside capital to start. All the questions need to be answered.
3. Compliance with employee hiring practices. You not only need to find the right people, you also need to know the legal relationship between you and your staff. There are state and federal compliance regulations to follow. Are there non-competition and non-solicitation agreements? What will the impact be?
4. Protecting intellectual property and trade secrets. Many business owners lump everything together under one umbrella. It is important to take the time to distinguish the different types and determine how best to protect each one individually. Patents protect ideas or concepts, whereas trademarks protect words, designs or phrases, copyrights protect creative expression such as music, books and video (something tangible), and finally trade secrets protect a product’s commercial information (think the Coca-Cola formula). All need to be documented and filed, however a patent is a longer more detailed process and a trade secret requires that no information about the product be discussed by anyone who has access to it.
These are just a few of the many legal steps that need to be taken when starting a business. Don’t be scared to fill out the paperwork. It may take a lot of time upfront but will save you a lot more time later on. Much success!