Starting a new business is an exciting part of any entrepreneur’s early journey. But before you start making purchases or advertising your services and products, there are a few things to consider. Here are some aspects to take into account when you’re starting a new business:
1. Ultimate Business Goals
You have to determine what type of business you want to be and what you’re growth strategy will look like. Will you start your business by taking a bootstrapping growth path by leveraging your own income or borrowing money from friends and family to support your business venture? Or will you need investors to support your business so that it can grow from the start? These are important considerations to take into account because it can determine how fast or slow your business grows. It can also determine who you’ll reach out to get your business off the ground.
2. Entity Type
There are several types of corporate entities you can consider when starting a new business, including limited liability companies (LLC), corporations and partnerships. Each are viewed differently for tax purposes at the state and federal level. For example, the federal government doesn’t recognize an LLC, but many states do. The corporate entity you select also impacts the length of time a company exists and the extent of liabilities. For instance, one person or several people may own an LLC. But your liability only extends to your business income when operating as an LLC. However, partnerships exist between two or more people, and have liabilities that may extend to your personal property.
3. Founder Roles
It’s important to determine and outline individual responsibilities for those within the organization. Without defining the roles of the company’s founders, you can easily run into issues with operating the company. Moreover, it’s important to know who the main contact should be when making public statements.
4. Founder Contributions
Decide on what each founder will contribute to the business in exchange for ownership in the company. This is crucial, because it can impact how much equity one founder should have over another..
Before starting a new business, it is recommended to spend time researching your new potential brand name. It’s also important to consider a name that is easy to understand and remember so that it’s marketable. Also, you don’t want to pick a URL that is already in use or a brand that may be trademarked.
Consider having a non-disclosure agreement and a non-compete clause or agreements ready and required for your employees and founders to sign to prevent unnecessary competition while protecting your intellectual property. Also, have an intellectual property or IP assignment. IP assignments are contracts that legalize the transfer of intellectual property rights to your business, which is essential when someone else is creating your product.
7. Taxes and Regulations
It’s vital to comply with local and state laws, including income tax, business license requirements, sales tax, industry-specific regulations and required inspections. If you don’t, you can face penalties, fees, and even litigation.
Johnstun Law focuses on providing startups, small businesses, and entrepreneurs with the day-to-day legal services needed to succeed. For more information on how we can help your business succeed, call us at 801-980-5300, or via contact form.
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