Build on the right foundation
Whether you're a company of one or 100, one of the best ways to protect yourself is to draw a line between you, the individual, and your business. To build your business on the right foundation, you need to incorporate. Not only will you be taken more seriously if you operate as a S Corp, C Corp, or LLC, you'll create a legal separation between your personal assets and those of your company.
This separation is important because it limits your financial and legal liability. For instance, if your business were to fail, you could declare bankruptcy and start over without affecting your personal credit or putting any of your family's assets at risk. It also entitles you to greater tax benefits than you receive if you operate as a sole proprietor.
Want help incorporating? Check out our Incorporation Center.
Comply with the law
Once you incorporate your business, your state will require you to take a number of steps to stay in "good standing". If you don't, you could lose your limited liability protection (which means that the invisible line between you and your business goes away), and your state could impose onerous fines and penalties.
Don't get caught unprepared. Visit our Corporate Compliance Center to make sure your legal house is in order.
Protect what's yours
Anything you or your employees have created is the intellectual property of your company. Make sure you protect all your creative works, product development, brand names and proprietary company processes.
In order to stake your claim and prevent unauthorized use, you should have anyone you work with sign a Non-Disclosure Agreement. You should also apply for a Provisional Patent for any original inventions you've developed, and trademark your brand name to protect the public image you've built.
Worried you're just renting your ideas? Visit our Intellectual Property Center to establish ownership.
Be a smart employer
Your employees are your most valuable assets, so you want to keep them around as long as possible and benefit from their best work. To build strong relationships and limit liability, you'll want to put employment agreements and terms of employment in writing, document company policies, and develop open lines of communication.
To find documents and practices that can help you be a smart employer, visit our Employment Center.
Maintain the right insurance
Properly insuring your business is important because it creates a safety net and makes you look more reputable to potential customers and clients. It is another way to limit your personal liability and can aid with rebuilding efforts after a natural disaster, inventory loss or theft, a lawsuit, or an employee injury.
The amount of insurance you need depends on your business, so visit our Insurance Center to answer any questions you may have.
Record everything in writing
No matter what type of business you have, putting your agreements in writing is always a good idea. It might feel good to settle a business agreement with a handshake and a smile, but creating contracts creates clearer expectations that will make sure everyone gets what they want in the long run. It also makes it easier to get paid when something goes awry, and it helps you be more professional and organized.
Maintain good counsel
You have a million things to think about, so researching the legal nuances of each issue may not feel like a high priority. That's why it's important to have a relationship with a local attorney who understands your business. They can be another pair of eyes on your contracts, a trusted advisor when making legal decisions, and your best friend when it comes to staying in compliance with the state.
As a small business, you don't need a lawyer on the payroll, but you should have one close at-hand. We can help you connect with a lawyer in your area for quick questions or in-depth legal representation.
At the end of the day, you, the small business owner, want to protect yourself. You want to separate your personal life and family from your business, you want your company to thrive and and you want to create more hours in the day. By getting your legal house in order, you can accomplish all of these goals.
It's an exciting time when you start your own business. When you put the right legal protections in place, it will help you reach even more exciting milestones as your business grows. Good luck!
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.