Disclaimer: This is not legal advice. This blog post is meant to outline the best practices for the legal side of business for small business owners. If you have questions regarding the legal side of business, please consult with a licensed attorney.
This is a guest post from our Podcast guest, Andrea Sager, Founder + CEO of Legalpreneur Inc.
As a small business owner, the legal side of things tends to get put on the back burner. I understand why. It’s definitely not as sexy as marketing or sales, but it’s something that can cost you everything if not taken care of in a timely manner. This means understanding the value of forming a limited liability company (LLC), using written contracts, and protecting your intellectual property. By doing so, you will be able to control how others perceive and interact with your business as well as ensure that all parties involved are held accountable for their actions. In this blog post, we will explore why LLCs, contracts, and intellectual property are essential elements of any successful small business plan.
Limited Liability Company (LLCs)
Let’s start with your business entity. This is how you legally operate your business. Some of the most common entities are a sole proprietorship, LLC, and a corporation. For the most part, an LLC is the best option for small businesses. The LLC protects you, the owner, against the debts of your company. Even if you do not currently have any debts in your company, you could in the future, and let’s not even mention if you were to get sued.
You may have heard you should wait to file the LLC until you’re making a certain amount of money in the business. Quite frankly, this is just bad information. Let’s say you do wait until you’re making $50,000/year in your business before filing the LLC. Now let’s say a year later, you find out you’re getting sued for something that happened in your business before you were an LLC. Although you’re an LLC at the time of the lawsuit, you were not an LLC at the time the act happened, so you don’t get the LLC protection.
There’s a lot to learn about LLCs. To keep this short, just know that you need to be an LLC as soon as possible.
We’ve all heard it, “Get it in writing.” But I can bet you’ve entered into an agreement at some point of your life without getting it in writing. Rule #1 for contracts is to always use a written agreement when money is changing hands. Keep in mind, the point of a written agreement is not to sue someone, although that option is available. The main purpose of a written contract is to lay out the rights and duties of all parties involved. A lawsuit is the absolute last resort, and you want to use all of the remedies available to you before thinking about a lawsuit, which is where written contracts come in.
Whether you realize it or not, intellectual property (IP) is most likely your brand’s most valuable asset. To illustrate, take a look at Nike. If all of their merchandise were ruined and they had no merchandise to sell until it was replenished, would they be out of business? Absolutely not. Nike would still be the billion dollar company they are today. Why? Because of the value of the company, not necessarily the sales. The value of the company mostly stems from the intellectual property they’ve created.
There are 3 main forms of intellectual property: patents, trademarks, and copyrights. Patents cover new inventions. Trademarks cover your branding, such as: brand name, logo, slogan, and anything that has a unique name within your business. Copyright cover your creative work, such as: blog posts, videos, photos, website copy, long-form social media captions, and any other creative work. When it comes to IP, you should be protecting it as quickly as possible.
I understand this legal stuff may not be very sexy, and you most likely won’t see an immediate ROI. However, putting these protections in place now can save you 100x more money down the road, and it can eventually bring in an entirely new revenue stream in your business.
If you have more questions or need help, check out Legalpreneur Inc.
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