Small businesses and startups are often unaware of their blind spots when it comes to early stage business decisions. Putting it simply, many don’t know what they don’t know. Here are three key areas that every small business should address when getting your venture off the ground to avoid a crisis down the road.
- Start with company formation
So you’ve decided to start a business. Your first step, even before business cards or decorative posters with cartoon cats indicating their distaste for Mondays, should be to form a business entity. Having a business entity is essential if you want to avoid putting your personal wealth and assets at risk. So while you may not mind operating your startup out of your backyard shed, you wouldn’t want to end up there due to poor planning.
It’s important to seek professional advice when determining what type of legal entity is best for your business, whether it be a LLC, C corporation, or S corporation. Make sure once you’ve completed that step, you follow up with the proper registration and licenses that will allow you to operate; for example, you’ll need a Employer Identification Number to open a bank account for your business.
- Find a company name you can use
With so much of business (and our lives) conducted online, decisions on a company name are often based upon domain name availability. While that’s not necessarily the wrong way to go about naming your business, you should be aware that owning a domain name is not to be confused with having a registered federal or state trademark, or even having the ability to use that company name.
Obtaining a domain name does not constitute a trademark. To use our business as an example, when we registered our domain for Traklight with GoDaddy as Traklight.com, we did not automatically receive the ability to create a company named Traklight, nor did we immediately have the right to market a product or company with that name.
Some companies make the mistake of thinking that they can get around the issue of similar names by having a different top level domain. Using our company again as the example, if we were to try and get around a similar company owning the Traklight.com domain by purchasing Traklight.net or Traklight.biz, we still wouldn’t have a trademark on the name Traklight or products called Traklight, and we would have no right to market or sell as such.
This would be especially problematic if we had already spent money on our website, logo, signage or printed materials that would immediately be rendered useless. That’s potentially thousands spent on things that can’t be used, and thousands spent having to start over with new branding.
This isn’t necessarily an issue solely for new businesses, as companies are frequently rolling out new products with new naming and branding. But for a startup with a smaller margin for error, it’s even more critical to make sure you’re starting on the right path and avoiding missteps along the way.
- 3.Get the correct intellectual property protection
We’ve all heard someone casually say, often in jest, that they’re going to patent whatever idea has sprung to mind. Most people with only a passing knowledge of the law don’t recognize the difference between the different types of protection that exist for intellectual property (IP). And many who start a business let this lack of knowledge prevent them from taking the necessary steps to protect their valuable IP.
Making sure that you have your ideas and creations protected is the most important step you can take in the early stages of your business. These intangible assets represent more than 90% of your business’ value. You first need to identify all the intellectual property involved in your business. Once you’ve done that, make sure that what you have that can be protected is protected, with the right types of protection. Having a patent on something that requires a trademark will ultimately be of no use to you, and disclosing something that is a trade secret will make it no longer a secret. When filing for patent, trademark, or copyright protection, it’s best practice to work with a professional. It may be cheaper to file on your own, but any mistakes can be even more costly in the long run.