So, you've got the entrepreneurial spirit and you're thinking of starting a small or family-owned business. That's the first step. Now it's time to start thinking about a business plan. The plan should be something more than a few ideas. You should write down every major step that you need to take in setting up your small business. Then have your attorney look it over to make sure that you didn't leave out anything important.
If you are starting a business, you'll need certain legal documents. The kind of legal documents depends on what kind of organizational form your business will have:
- For a sole proprietorship, you might need a lease to be written or reviewed. You might be interested in purchasing property for your new business, so you will probably need some help with the sale and the sale documents. You might need some assistance with financing your business. You could need estate planning documents, such as a will or a trust to direct the disposition of property after your death. You might also need a power of attorney, which enables your representative to make your legal decisions if you should become incapacitated
- For a partnership, you will need a partnership agreement drafted. Such an agreement describes who the partners are, how much of the partnership each owns,and who is contributing specific assets. It also sets out duties and obligations. It lists salaries and sets out profit-sharing amounts. It should include a provision for what happens to the partnership when a partner dies and what happens to assets and liabilities if the partnership is dissolved
- For a small corporation, you will need incorporation documents, such as by-laws, minutes of meetings, and subscription agreements. You will need a name for your corporation, and you will have to register that name and your corporation with your state's secretary of state. You will have to decide how to capitalize your corporation and who has voting shares. You will also need some help in issuing securities or "stock"
There's a lot to do, but a small business lawyer can help you with these requirements.
As part of running a business, you will have several kinds of business taxes to track and forms to file with the proper agencies and pay the required taxes. These taxes include state and federal income tax, federal estimated taxes, unemployment taxes, real and personal property taxes and sales taxes. These taxes have to be paid on time, or you will get behind, and the consequences might include penalties and interest on the amount owed.
Depending on what kind of business you start, you might have some other concerns, such as:
- An invention you need patented in order to protect your investment
- Trade secrets and methods of protecting them
- Competition from former employees and non-competition agreements
- Documenting practices likely to be challenged under antitrust laws
- Procedures for hiring employees
- Employee handbooks
- Defensive tactics to a potential takeover
- Health insurance
- Business insurance
- Corporate loans
You will need to address fundamental issues of starting and running a business and any other concerns that you might have. What are you going to sell? Who do you think your customers will be? How will you pay for inventory? Do you need employees, or can you and family members handle the day-to-operations?
Write out a plan of action first, and then go see your lawyer. Chances are your lawyer will think of something that you may have overlooked.
Questions for Your Attorney
- What kind of legal documents will I need to run my business as a sole proprietorship?
- What are incorporation documents?
- What kind of taxes will I have to pay on my new business?