by Deborah Sweeney
Running MyCorporation has been one of the most exciting and fulfilling experiences in my life. I love having my own business, being able to watch it grow and develop – it’s like having a third child, minus the screaming and diapers. My experiences with MyCorp are also why I always encourage anyone with a good idea to take the plunge and become an entrepreneur. Unfortunately it isn’t as easy as saying “All right then!” and filing some paperwork – business ownership brings about plenty of apprehension. My encouragement is typically retorted with a quick “Well, what if I get sued?” or a “But what if I never make it off the ground?” These are serious concerns, but there are ways to help beef up the legal protection around yourself, your family, and your assets. My top three recommendations for any budding entrepreneur with visions of ruin rather than riches are to:
1. Incorporate or form a Limited Liability Company
Most small businesses keep a sole-proprietorship structure; it is kind of the default for new businesses with one owner. Plus it is easy to create, maintain, and pay taxes for. Pretty much everything goes back to the owner, and that is that. But this structure provides absolutely no legal protection to the owners. If the business goes belly up, creditors will come after the owner’s assets to pay the business’s debts. Every new business should look into incorporation or LLC formation because it will turn their business into its own legal entity with its own assets and wage, separating the business from the owner. So even if things don’t end on a high note, the owner still has a house to go back to. Plus, if their business gets into any legal trouble, the plaintiff will be suing the business, not the owner. All personal assets will remain untouched.
2. Copyright your intellectual property and file for trademarks
This pearl of wisdom is the one most often overlooked. Most business owners I talk to feel like there is no reason to copyright anything – they run a little shop in town or a small enterprise online, who would want to rip them off? That is a TERRIBLE mindset to have when running a business. Your business will be built on your blood, sweat, and tears. Its reputation will be hard won, and the last thing you want is for someone to come in and swipe it all away for their own venture. And it does happen. I’ve heard heart-wrenching stories of owners who have seen their logos and jingles ripped off by a local competitor trying to use less scrupulous means to get ahead. Of course they could take them to court, but that means a nice hefty legal bill at the end of the ordeal. Protect yourself sooner rather than later. It means spending a little extra money, but it is a lot cheaper than having to deal with a lawyer.
3. Buy a General Liability Insurance policy
No matter whether you’re running a busy restaurant or small consulting firm, businesses are unpredictable. They still need insurance. When an accident inevitably happens, or a serious mistake threatens your business, you don’t want to be counting pennies on your office’s floor, desperately trying to figure out how to solve the problem. General liability policies aren’t very expensive, and provide a wonderful little monetary cushion to land on if one is needed.
No matter what, running a business is always going to be a little frightening. There are a lot of variables involved, and there were plenty of nights where I sat awake worried about things I had no control over. But there are always steps you can take to prepare for the future, to put a little bit of space between your personal life and your office life. So before you open your doors, make sure you’ve done everything in your power to create a nice legal bubble for you and your business. The little hiccups and bumps in the road will still make your heart flutter and your mind race, but any legal steps taken early on will help take the edge off.