So you’ve got a great business idea and you’re excited to share it with the world. Now is the time, at the earliest stage when you’re honing your mission and image, to ensure that you’ve put all the necessary legal responsibilities on your to-do list.

According to the U.S. Small Business Administration (SBA), there are some basic yet necessary steps to launch a business and to stay legally compliant with state and federal business laws. The specifics of your responsibilities depend on your type of business and location in the U.S., but many of the tasks are the same, from filling out forms to paying fees. For some startup founders, taking care of these legal issues can be a daunting learning curve, and they may want to hire a business or legal specialist to get them started off on the right foot.

4 Legal Tips for New Startups

1. Be Thorough with Your Trademark Search

If your name is Fields and you want to sell cookies, a basic internet search will tell you that you’ll need a name other than Mrs. Fields. In fact, using “Fields” in your company name at all in the cookie trade may cause your new business to crumble. Aside from its legality, picking a memorable name for a business is partly determined by its availability as an internet domain that ends in .com or .net, though other suffixes like .biz are becoming popular. To search for available web names, use a reliable registration site like DomainRegistry.

Beyond what’s available on the web, a trademark search—a thorough one—is essential for aspiring brands. If you go into business with a name that's the same as or similar to one that's already in use (or even an acronym that's already in use), you may face liability. Without a proper trademark, you may receive a cease-and-desist letter demanding that you stop using your business name. Even if you undergo the formal process for a trademark, once your application enters the pre-grant stage, competitors can see it and may tell you (and the courts) that it could cause confusion among consumers. You might be required to rebrand, which is expensive and, depending on how established you have become in the market, could discourage customers.

When Apple launched in 1976, the same-named media company owned by The Beatles won a legal settlement requiring Apple Computer to remain out of the music business, which worked well until Apple Computer launched its iTunes Music Store and the iPod, bringing another legal case and expensive settlement. An example of a company that backed down is World Wrestling Federation, which changed its name to World Wrestling Entertainment after the World Wildlife Fund sued over the use of the acronym WWF.

Begin your entrepreneurial journey on the website of the U.S. Patent and Trademark Office, where you can search for word marks (e.g. brand names) and image marks (e.g. logos). Extend your search, if possible, to any relevant state website. Some registered agent websites have trademark monitoring tools as part of a business launch package.

2. Choose the Right Business Structure

You may want your new business to reflect your personal identity, but for legal purposes, it’s prudent to create a separate legal entity. This allows your company to own assets separate from its owners (you and any partners), to serve as an investment vessel for raising funding (through bank or SBA loans, angel investors, or venture capital partners), and to protect you, partners, investors, stakeholders, and shareholders from lawsuits and other legal actions.

Like building a house that suits your needs, when you open a business you choose its structure and register it as a DBA (Doing Business As). Sole proprietorship may be the simplest for a single owner, but you will be personally liable for any legal issues and debts. Under the protective guidance of the separate legal entity, consider the following choices, each of which carries its own tax burdens and benefits:

• Limited liability company (LLC): Best for many small businesses, including single-owner companies, and provides flexibility in management and taxation.
• Limited liability partnership (LLP): Best for businesses formed by two or more owners, and one of the most common structures for professional businesses.
• C/S corporations: Like LLCs and LLPs, S corps can enjoy pass-through taxation where distributed profits are only taxed at the individual level. In contrast, C corps are taxed on their corporate income and also at the shareholder level for any profit distribution, such as dividends. You must first form a corporation at the state level, then either seek tax classification as an S Corp or remain as a C Corp.

Secure all items required for operational compliance, which includes establishing a complete business identity. The process to obtain the needed elements can be remembered by using an acronym promising well-deserved rest when you’re done: NAP. This stands for legally distinguishable company Name, physical Address, and any regulatory agency Permits, licenses, or other approvals, as needed.

3. Take Full Advantage of Tax Deductions

Federal and state law is geared toward encouraging the growth of business. This is made possible, in no small part, by tax deductions. With the guidance of an experienced CPA, you can save your company thousands of dollars each year simply by taking full advantage of these, as they may apply to your business.

Typical expenses that can be deducted include rent, utilities, salaries and wages, office supplies, travel and transportation, marketing and advertising, professional services, insurance, maintenance and repairs, licenses and permits, software and subscriptions, training and education, interest and bank fees, cost of goods sold, and taxes.

4. Get a Jump on Succession Planning

As you’re in the process of getting your new business off the ground, it may be hard to imagine that one day, perhaps decades in the future, you may need to hand the reins to someone else. But like starting a 401(k), it’s always best to begin early to ensure that your company runs smoothly after you leave.

Having a business succession plan in place can ensure continuity, offer tax breaks, and provide other benefits. Imagine a full breadth of exit scenarios—company sale, merger, hostile takeover, retirement, sickness/death—and develop a preferred strategy document that accounts for all of them. In every situation, plan who will move into top leadership roles, whether partners, employees, or family members, should you wish to create a family-owned legacy business.

Based on this plan, your effort to cultivate successors can begin as soon as necessary. If your goal is to eventually pass ownership and control to the next generation of leaders through the Willy Wonka model—in which you have a chance to mold a young successor—or a small management team reflecting departments in your company, it is important to provide transparent access to proteges early on, allowing them to understand the business from your point of view and training them to develop the skills to assume your role, seamlessly, when the time comes.

Don't Wait to Take Care of Legal Essentials

While this article provides informational commentary rather than legal advice, the four subjects that it spotlights should be on the radar of every startup. The intersection of business and law is seen in every imaginable sector, from the most complex multinational corporation to the humblest street vendor. Making sure you stay on the right side of the law from the beginning will save you time, money, and frustration, guiding your business passion toward a profitable and enduring future.

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About the Author

Post by: Gib Olander

Gib Olander is a business strategist and chief product officer of Northwest Registered Agent, which offers corporate formation, domain buying, web hosting, and customer support.

Company: Northwest Registered Agent
Website: www.northwestregisteredagent.com
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