Do you have a great business idea and are ready to take the next step to get the business up and running? Here are 5 important legal considerations all entrepreneurs should think about when starting a business.
Choosing a Legal Entity
An important first step is choosing the type of legal entity that best suits your business. There are three main options: sole proprietorship, partnership, and corporations. Major factors to consider when choosing a legal structure include liability, taxation, investment needs, and expense and formality. It is highly recommended you consult an experienced business attorney to help you choose the legal structure that will best allow you to achieve your business goals.
Selecting and Registering a Business Name
In Michigan, a business name is registered when the legal entity is formed. A sole proprietorship or partnership that uses the owner’s name does not have to do anything to register the business’s name. But if they plan to use a different name, they must file a “DBA” (doing business as) certificate with the County Clerk in the County where the business is located. A corporation or LLC registers its name when it files its incorporating documents with the Michigan Department of Licensing and Regulatory Affairs (LARA).
Once you’ve created your business, you need to think about how to fund that business. There are several options, including traditional bank funding, working with venture capitalists or angel investors, crowd funding websites, taking out loans from friends or family, or funding the venture yourself. All of these funding options have pros and cons you should look into before choosing your preferred option(s).
Zoning and Other Local Considerations
Depending on where your startup is located, the local governmental unit (city, township, village, etc.) may require you to obtain a specific license. You also need to make sure any facility your business occupies complies with all local laws and regulations, including the local zoning ordinance and building code.
Protecting Your Intellectual Property
Making smart intellectual property decisions early on will protect your startup for years to come. Registering a trademark with the USPTO allows you to reserve nationwide rights to your mark, which will allow you to easily expand your business in the future. Or if you are making a specific item, obtaining a design patent prevents others from making an exact duplicate of your product. While this might seem like an unnecessary expenditure early on, it is a strategic step in protecting your long-term business interests.
This is meant to serve as a very basic and general rubric for entrepreneurs to consider when forming a startup. If you are thinking about forming a startup, feel free to contact Dalton & Tomich to discuss your idea in detail and what legal options will best help you reach your goals.