Sunday, July 12, 2009

Starting Your Business by the Book

I've gotten some recent questions about the legalities of starting a business. Thus, this week I thought I would address some of the more common legal issues most new businesses face. But first, let's get the mandatory legal disclaimer out of the way: the advice dispensed by this columnist is probably no better or worse than the advice dispensed by other columnists. Do not take the following advice as Gospel or bet the future of your business in any advice given herein by said columnist.

Agree? Good, let's continue.

To begin, here are the best legal advice I can give you as a new business person: find yourself a good lawyer and make him your true friends. Granted, your new best friend charges you an hourly fee for chatting on the phone or talking business lunch, but you'll see it to be money well spent. A good lawyer can save you far more than the value of his services. I rarely make any decision has the potential to impact my business without first consulting my attorney.

You can find a lawyer through legal referral services or just by opening the phone book, but the best way to find a really good lawyer is to ask other owners business for referrals.

You want an attorney that Specializes in business matters. Some of the things you may need legal assistance are: legal business formation, articles of incorporation, trademarks and copyrights, investment documents, employee policies, etc. You can see that a lawyer does not meet all your needs, but if you use a larger company that they have lawyers on staff to provide special needs services.

Now, let's take a brief look at a few questions I received regarding the legalities of starting a new business.

What is a dba? "Dba" for "doing business as." A dba is another name that you use in running your business except legal name. For example, "Jones, Inc." might be the legal corporate name of your business, but you can use "Bob Jones Landscaping" as the daily business. In this case, you would see the business described in legal context as "Jones, Inc. Doing Business As Bob Jones Landscaping."

Here's an example of using a dba to launch a new venture within an existing business. A reader asks: "My wife incorporated a multimedia business three years ago, and am starting a voice-over business. More nutritious it for me to open as a sole proprietorship or to work within her multimedia business? "

My answer is that he should open his company as a division of his wife's business, operating as a dba. Although he was using his own business (the dba), technically his wife a corporation is launching the service and then give him some liability protection. Doing so will also help him save the start-up costs (such as having to pay for a separate incorporation). It is relatively simple to maintain a separate set of books, and when the new business takes off, he can spin it into a separate entity.

Is a corporation protect me from liability? Is, if handled correctly. You may have heard about "corporate veil," which means that you can not be sued personally for anything that happens in the corporation and your personal property can not be attacked by creditors or the corporation in a lawsuit. But to obtain this protection, you should act like a corporation. This means conducting board meetings, taking the notes and publishing minutes in your corporate book.

In addition, make sure you have a separate corporate checking account, and if you need them, corporate credit card. Do not use company money for personal purchases, and vice versa (unless a file expense reports). Many people think they do not need to go to all this trouble if there is only one or two people in the company, but to be treated as a corporation, you must act like one. Your lawyer can give you more details.

How do I register my company name? To register your company name simply contact the office of Secretary of State. This is easily done by phone. The registrar will tell you if the name you have in mind is available as a corporate name and the name for you if it is available. You sent a form to complete and submit a nominal fee. For more information you can also visit the Secretary of State website.

Do I need a business license? Almost all businesses require a county or city license. Fortunately, such licenses are relatively easy to get and not expensive. For local licensing requirements, contact your city or county government offices.

Some businesses may require a state license. For example, hair stylists, contractors and most businesses serving food fall under the jurisdiction of the state licensing board. Each state has an agency that deals with the types of businesses. Contact your local government offices to see if your business requires a particular state license.

Some businesses even require federal licensing. Examples of such businesses are providing investment advice or deal in firearms. Federal licensing is typically required for businesses with highly regulated by the government.

I operate my business out of my house. Do I still need a license? Operating a business out of your house is not off the hook when it comes to licensing. You should check local zoning requirements and property covenants. You can find this information in the court house or by calling your local license department. Home businesses are also subject to zoning laws that regulate how property can be used and may restrict various activities.

This is only a sample of legal issues that must be addressed by each new owner of the business. To learn more, take your favorite lawyer to lunch.

Just be prepared to pick up the tab.

Here to your success.

Tim Knox, entrepreneur, Author, Speaker, Radio Host Founder, The Insiders Club, Giving You The Power To Start Your Business Now Bestselling Author of: "Everything I Know About Business I learned From My Mama "


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