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Feb 10 2011

5 Steps To Protect Your Small Business

As an attorney representing businesses both large and small, it can be very disheartening to meet with a client who has a major legal problem that could have been avoided or lessened by receiving proper legal advice right at the start.  Small businesses are particularly susceptible to this problem because generally they are watching every dollar as they get their businesses started and having a consultation with a lawyer seems like a luxury item they can put off until their business matures. With proper planning, however, the meeting can be done in an hour or two as the purpose of the meeting is to provide a framework to avoid issues, not necessarily resolve all the potential issues.

Before the Meeting

Prepare an outline of questions so you are organized and make the most use of the hour.  Write down concerns about the operation of the business even if they are not specifically law-related.  Organize your documents so you have them ready and don’t waste time looking for them. Remember to limit small talk and don’t allow yourself to go off on tangents that are unrelated to the issues you want to discuss -make the most of the time you can afford.

Here are five common issues that tangle up a small business and which you should address in your initial meeting with an attorney:

(1)Proper corporate formation and operation. Corporations protect your personal assets from being reached by your company’s creditors. But the corporate veil can be “pierced” if the company was improperly formed or operated.  So keep your personal expenses out of the company; keep accurate records of stock ownership;  have monthly meetings with your accountant if there are no other stockholders and keep minutes of those meetings. Don’t have an accountant? get one immediately to handle your finances.

(2) Operating Agreement Between Partners. Many small businesses are made up of two partners.  Having a written operating agreement between you is essential to avoid misunderstanding and frustration down the road. Think of it as a business pre-nup. While it will take longer than an hour to prepare one, in the initial consultation you can at least find out what the issues are that are addressed by an agreement and discuss them with your partner

(3)Intellectual Property Issues. Do you own the right to your name and trademark? Where did the images and written content on your website come from? This is an area that can be costly to address if you are found to be infringing on someone else’s IP. Have your counsel give some guidance on how to avoid IP problems.

(4)Insurance assessment. Different businesses need different types of coverage.  Some types of coverage  are mandatory for particular businesses. The nature of your operation will dictate what type of coverage you must have and what you can live without for now. When a claim comes in, you will be glad you took this step.

(5)Compliance with local laws. Make sure the attorney you meet with has knowledge of not only the Federal and State laws applicable to your business but local laws and ordinances (fire, occupancy, parking)that can result in heavy fines and possibly a shut down if you fail inspection.

Conclusion:

While there are other issues that may arise in starting and running your business, making sure you have these five issues addressed at the start of your business makes it much more likely that you can spend your time and energy on your actual business and not on legal issues.

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