When you’re starting your business, it’s natural to want to focus on the things that you want to do and accomplish and put some of the more tedious chores to the back-burner. You are the innovator, the dreamer, and what creative wants to be bogged down with the nitty-gritty of paperwork and forms and contracts? But in ignoring these details at the outset of your business, you could be placing your company’s long term future in jeopardy. Frequently, it isn’t the obvious threat that seems to be staring us in the face that does a business in, but a seemingly inconsequential oversight that can spell doom for a company. Here are some areas to pay attention to early, before they grow into larger problems.
Make sure you’re not violating employment laws.
Not violating the law may seem like something of a no-brainer, but it’s possible to find yourself unknowingly in violation of your state’s employment laws. You may have employees, contractors, or some combination of the two. And while you may not give too much thought to the difference between employee and contractor, there are important distinctions between each of these in legal terms. If you start treating your contractors like employees, they will be seen as employees by the law, with all the implications that come with employee status. When you’re hiring people for your business, make sure that both you and your prospective hires understand their role at the company, and that you stick to those definitions.
Start off with the right entity
Many entrepreneurs aren’t experts in the fields of business law or incorporation, and even more are starting off on a small to non-existent budget. In trying the do-it-yourself method to early legal matters, far too many make costly mistakes in forming their business that can be costly in the long term. When looking to form a business entity, it’s usually a good investment to get assistance from a lawyer to do things right the first time, rather than having to pay later to undo previous errors. Many startups opt for a LLC or C-Corp when forming a business entity, but consulting with an attorney is the best way to determine the correct option for you.
Work with the right people
Starting a business with one or more partners is a bit like a marriage, with all parties involved making a big commitment with the best of intentions. But just like marriage, you don’t want to go into business with someone you’re not compatible with. We’d all like to think of ourselves as considerate and easy to work with, but the truth is that we all have our own traits and quirks that can endear or annoy. And the startup world can be a tough one, a daily grind that not everyone is cut out for. Your business can’t afford the delays that come with constant arguments and infighting. Before taking the plunge, make sure that your prospective business partners are people you can work with long-term.
You can read the second part next week.