Three easy things you can do to protect your business.

Featured

Jun 10

Have you ever heard “don’t worry about *xyz* for your business until...” ? Well, legally protecting your business should be something you think about right away! Does this mean you need to spend thousands and thousands of dollars? Not necessarily. Here are a few things you may want to consider from the start that generally won’t cost much.

1) Consider setting up a Limited Liability Company (LLC).

Did you know that you, as the business owner, actually can do this on your own, and it’s pretty straight forward? Most state LLC filings are under $200, and they can be filed online, through the right state department - usually it’s the Secretary of State, but in some states it’s through other named departments such as the Department of Financial Institutions (WI) or Division of Corporations (DE).

You will need to make sure you know the requirements for filing in each state (ie. one area where a lawyer could help). For instance, a lot of states require that you have a Registered Agent. A Registered Agent is an individual (or company), that will accept legal papers on your business’ behalf. Business owners can generally act as their own registered agent as long as they have a physical street address where they are always present during business hours. There are also companies that you can hire to act as your business’ registered agent, usually for $100-$300/year.

By setting up your LLC, and managing it correctly, you can provide a level of protection that you won’t have if you just start a business as a sole proprietorship.

2) Get your business’ money in order.

As a business owner, you need to keep track of your money. You should have a separate bank account for all of your business expenses and incoming payments. Keep your personal money and business money separate, and keep track of all of the dollars coming in and going out.

If you’ve set up an LLC, you can set up your Employer Identification Number (EIN) on IRS.gov for FREE. Many banks require EINs in order to set up a separate business bank account, which will only cost you the minimum deposit required by that bank. Setting up this separate account helps streamline your accounting if you use that account, and that account only, for all of your business needs.

Commingling your business and personal expenses is a big risk! Even if you filed a LLC, but you don’t have separation of your business money and personal money, you’re putting yourself and your business at risk. One of the last things you will want to worry about is whether or not your personal assets could be claimed against for any business debts, defaults, or lawsuit judgments.

3) Ensure you have the right types of contracts for your business.

And before you say anything, all businesses run off contracts. Even if you aren’t a service provider there are so many other types of contract you will need to consider such as…

Website Terms & Conditions
Privacy Policies
Return Policies
Testimonial Releases
Media Consent Forms
Affiliate Agreements
Guest Agreements (for podcasts or blogs)
Design Licenses
Purchase Orders
Independent Contractor Agreements
Just to name a few.

Different businesses will require different contracts, and different contract terms.

Especially if you’re a service provider, one of the most important things to have in order are your contracts. And this is where it really can make sense to spend money. A good client contract will memorialize the understanding between the business and the client. It should define things like payment, ownership rights of created assets, termination, and so much more. Well written contracts are easier to enforce if there is a dispute, because there’s proof of your terms, versus a “she-said-she-said” scenario...& please don’t start work before you have a copy of the signed contract! Ever get into a disagreement with a client about payment? It’s going to be a lot harder to enforce an agreement without a written and signed contract, because it’s your word against the client’s.

Don’t use someone else’s contract unless you know 100% that it will protect your business! Not all business should have the same contract EVEN if you and the person you got the contract from are in a service based businesses. Some services require extra protections for intellectual property, some need license language, etc.

Professionally drafted contracts can range from a few hundred dollars, to a few thousand depending on the type of contract you need, how many different types of contracts, and the hourly or flat rate of attorneys in your area.

(Interested in template contracts, check back here, as they’re coming soon!)

And there you have it- three easy things that can help protect your business!