You have an idea, a vision, a great new product or service and you are ready to take on the world. So how do you make sure your business is covered to handle any legal issues that may arise during formation? Here are five things to keep in mind to help you build a successful startup or business.
Choice of Entity
One of the most fundamental issues to address at this early stage is selection of the entity through which the new business will be operated and through which equity interests will be allocated to the founders, employees and investors. Among the various entities available in the United States are corporations, general partnerships, limited partnerships and limited liability companies (“LLCs”). The two most significant factors affecting choice of entity are limitations on liability, and tax treatment.
Choice of Jurisdiction of Incorporation/Formation
Once the decision is made on the type of entity, a state or jurisdiction of formation must be selected. Among the factors to be considered are, the depth and predictability of the jurisdiction’s law and judiciary, the nature and extent of protection available for officers and directors (or their equivalent), the flexibility and user friendliness of the jurisdictions laws and administrative agencies and the administrative costs and franchise taxes.
Is My Business Complying with the Law?
In all businesses, it is important to maintain records and documents in order to comply with the law. An attorney can apprise you of changes in the law, what requirements you need to fulfill for your business, and independently review corporate documents before they are filed, to ensure that they are in compliance with the state or jurisdictions corporate laws.
Establishing a New Employment Relationship
In most cases, the founders of an emerging company will become employees of their new venture. Therefore, it is very important that “employee offer letters” be prepared for each founder specifying their role in the new company and any relevant salary or benefit information. The most important reason for preparing the employee offer letter is to put in writing that the founder’s employment will be “at will” and may be terminated by the corporation at any time. Many states have statutes providing that employees, in the absence of agreements to the contrary, will be considered “at will” employees. If not drafted correctly, employee offer letters can become “employment agreements” entitling an employee to a certain period of employment or severance arrangement.
Am I Protecting my Intellectual Property?
With so many companies and business names available, it can be hard to know if there is already an existing business using your intended business name. Before picking a business name, have an attorney run a trademark search to ensure availability of your intended name. Once you find a name that is available to use, register your name and logo so that you can protect yourself from any infringement on your intellectual property.
Follow these tips to get your business or startup going on the right foot and remember to reach out to professionals for help on your road to success.
About the author
Jessica Mauceri is a law student at Benjamin N. Cardozo School of Law in New York City. At Cardozo, she is an Articles Editor for the Cardozo Arts and Entertainment Law Journal, a New Student Mentor and a member of the Entertainment Law Society and Intellectual Property Law Society. Jessica currently participates in the Indie Film Clinic, where she provides pro-bono legal assistance to independent documentary filmmakers. She received a Bachelor Degree in Sociology from the SUNY College at Cortland.
In her free time, she enjoys watching the New York Yankees and traveling to baseball stadiums around the country.