 So you're ready to start your business. What do you need to make it official?
Whether you plan to operate your business in Pennsylvania, New Jersey, or Delaware, you must go through a state process to formally recognize your business under the law. Why bother going through this process at all?
What Are the Basic Legal Requirements to Start a Business?Even though these are the “basics” of creating a legal business, getting the help of a business lawyer can make a huge difference in the success of your venture. Because these are the basics, they’re also the foundations upon which you’re building your entire business. You want the foundations of your business to be as strong as possible, engineered to weather the stormy markets and the trials of business partnership. The best way to ensure this is to get the help of a local business attorney who knows the business laws in your state. 1. Choose Your Business StructureWhen it comes to how to structure a business, you've got options. The following business structures give you the least legal protection:
2. Register Your Business Name as a Legal EntityOnce you choose the structure for your business, you must file the appropriate paperwork. This part of the process includes registering your official business name with the state, whether that’s Delaware, New Jersey, or Pennsylvania. The requirements may vary between states. If you do business under multiple names, you can also legally register your various trade names and assumed names as DBAs, or “doing business as.” Can You Start a Business Without Registering It?You can – see the section above about sole proprietorships and general partnerships. However, if you don’t actually register your business, you open yourself up to a lot of risk and liability. Not to mention, if you fail to register your business name, someone else could take it. 3. Get an EIN (Employer Identification Number)Any business with employees will have to get an EIN, otherwise known as an Employer Identification Number. This is a 9-digit federal tax identification number. EINs are free from the IRS website. Sole proprietors and single-member LLCs with no employees do not have to get an EIN – the single owner can use their social security number on paperwork instead. But an EIN helps keep your social security number private. 4. Get All the Necessary Permits and LicensesDepending on the type of business you operate and the industry you're in, you may need additional permits and licenses to begin operations. Construction companies, startups, tech companies, restaurants, and even certain retail businesses need permits. Operating your business without the proper permits could expose you to fees, penalties, or even civil or criminal charges. But running your business is already a full-time job – you don't have the time or expertise to go into all of the legal requirements on top of everything else you do. That's where a business attorney comes in – to make sure your company stays in compliance. 5. Pay State and Local Tax RequirementsSome states and localities have additional tax requirements for business entities, such as annual tax filings. Missing these filings could lead to fees and penalties piling up over time. 6. Get Insurance for Your BusinessAlmost every type of business comes with some level of risk. Even in a simple store, customers may fall and get injured. Without insurance, you could be stuck paying the bill. Your business attorney can go through your operations and identify areas of risk that should be covered by insurance in order to best protect your company. General liability insurance tends to be the bare minimum, covering property damage and personal injuries. But you may also need product or professional liability insurance, commercial property insurance, workers’ compensation insurance, or auto liability insurance if your company operates vehicles. 7. Protect Your Brand and Intellectual PropertyFinally – you must take steps to protect your brand and intellectual property. Market recognition doesn’t come easy. Customer trust is hard to build and even harder to get back if you lose it. You don't want to pour your heart and soul into building a brand or product just to have it stolen from you by competitors, copycats, or counterfeits. Your intellectual property or brand name may be or eventually become your company’s most valuable asset. Your lawyer can help you protect this asset and keep your market advantage by filing for the necessary copyrights, trademarks, or patents. Your Next Steps After Business RegistrationRegistering your business makes your venture official. But the legal requirements don’t stop there. Compliance is a regular part of keeping your company healthy in the eyes of the law. Compliance becomes even more critical if you have employees. The best next step is to make sure you outsource your legal compliance to a business lawyer who can keep all of your paperwork and legal requirements up to date. Business partnerships are a powerful way to grow your company’s operations and forge your way into new markets. But a successful business partnership needs more than just a handshake to work, even if you and your business partners already trust each other.
Even the most well-aligned business partners need help and guidance in making the best decisions for their venture. The way you set up your partnership’s fundamentals – from partnership formation to profit and loss distribution, dispute resolution, and partnership dissolution – can make or break your business goals. That’s why our business lawyers put together the Business Partnership Playbook – a guide to all the legal considerations you must make in a business partnership. Download the FREE Partnership Playbook now. Nothing beats personalized legal advice from a knowledgeable business attorney who can set up your partnership for the best chance of success. This comprehensive PDF is not legal advice, but it can help you understand what to look out for and how a business lawyer can help. As always, you can contact our business law team at 215-482-0285 or book a call with us now. The Partnership Playbook addresses the most frequently asked questions about business partnerships and helps break down what makes a successful partnership. How Do You Form a Successful Business Partnership?First, you must decide if you and your business partner will create a new business entity for your partnership or contract as partners to work on a business project together. Your partnership will function differently based on how you answer that question.
The clearer you are on these questions going into your partnership, the better you’ll be able to orient your efforts to meet your goals, and the more solid your partnership’s foundations will be. You get a huge advantage from considering important issues ahead of time – before they become problems. A business attorney’s job is to help you anticipate these scenarios that you might not otherwise even think about, saving you time, money, and headache later on. Equity, Voting Rights, Distributions, Allocations, and Profit/Loss Division in Business PartnershipsLaying out each partner’s roles, responsibilities, and benefits is one of the best ways to avoid running into conflicts and disputes down the line. The Partnership Playbook goes over the following questions and how they can affect your business relationship:
These questions do not have a one-size-fits-all approach. The answers depend heavily on your unique circumstances, goals, and vision. Only a business lawyer can help you set up the best partnership configuration that’s tailored to your specific needs. Your lawyer can also help you avoid common pitfalls and mistakes that entrepreneurs make when they don’t have the right counsel and advice. For example, you may think the most sensical way to split a partnership between two partners would be 50-50 down the middle, with equal voting rights for equal or similar contributions. But a 50-50 split on decision-making can easily lead to stalemates that can stall or even dissolve the partnership. Instead, splitting power 51-49 between partners gives final decision-making power to one partner, allowing the partnership to continue functioning even when partners cannot agree. Disputes, Critical Developments, and Partnership DissolutionsEven with the best planning and risk assessment, partnership disputes happen. Lives and circumstances change, leading to critical developments for the partnership. The better prepared you are to handle these curveballs, the better your partnership is bound to fare. In other cases, partnerships naturally dissolve when the business venture is complete – hopefully as a success. When you work with a business lawyer, they can help you lay the groundwork for how disputes and critical developments are handled in your partnership. The Partnership Playbook covers common scenarios and questions, such as:
The right knowledge and advice can make a world of difference to how a business partnership will fare. The Partnership Playbook will help you better understand the strategies that make partnerships more likely to turn their visions into reality. Download the FREE Partnership Playbook now. Still, you need a personal approach to the unique needs of your business. To get started, contact our business law team at 215-482-0285 or book a call with us now. Imagine this scenario: your business partnership is off to a great start. You and your partner get along and work well together. Your vision is aligned and you've knocked a few business goals out of the park already. And then one of you falls ill, or your partner has to move away, or another company offers to buy you out. What do you do?
We all know what happens to best-laid plans. Sometimes reality doesn’t work out as imagined, no matter how strong your vision and will. Nobody goes into a business partnership expecting it to go badly – hopefully, you’re excited and optimistic about your venture. While you can’t anticipate everything that could possibly go wrong, you can cover the most common contingencies with a little bit of planning. Thinking about worst-case scenarios isn’t pleasant but it can actually save your business partnership in case of any unexpected turns. You can start planning for the unexpected in your business partnership agreement. But even if you don’t prepare for the unexpected ahead of time, you can successfully work through many of these situations with a partnership agreement modification. Depending on how well you and your business partner communicate, you could move forward with a partnership modification through mediation with a neutral third party or negotiation where you and your partner are each represented by legal counsel. Creating a strong foundation in your partnership agreement will help you weather any storms that come your way. It’s important to get a personalized approach to your partnership since no two businesses face the same issues and risks. This is why templates often don’t work. A business attorney can look out for you and help protect you from these curveballs. Handling Critical Partnership Developments A business partnership is first and foremost a human endeavor. Business partners often act as driving forces, pouring their passion, efforts, capital, and time into the venture. So when a partner’s circumstances change, that can dramatically affect your business. A strong partnership agreement will act as a guide for how to handle these situations. In the absence of guidance from your partnership agreement, you and your business partner can sit down to negotiate new terms for how to move forward. Partners must be in unanimous agreement when making changes to the terms of their partnership.
If you’re unable to come to a unanimous agreement to amend your partnership, you may have to halt operations, dissolve the partnership, and litigate the division of assets and debts. How to Handle Sales Offers for Your Partnership A business partnership could be sold in full with the unanimous consent of all partners or in part, where a single partner sells only their share of the partnership. Again, it helps to anticipate the sales process in your partnership agreement before any offers come in. By following your previously agreed-upon terms, you and your partners have a solid idea of what to expect. This can help the sales process go much more smoothly. When presented with a sales offer for your business, you must usually meet with all the partners in order to vote on how to proceed. The rules around this process will change based on your partnership terms and which state laws apply. So a Pennsylvania business sale will operate under different rules compared to New Jersey or Delaware. You will have to decide which assets will be sold and how debts will be handled in the sale. In addition, you will have to consult with a business advisor and appraiser to get an accurate idea of how much your operation is worth. Your business lawyer can help by referring you to the appropriate experts, negotiating for you, and protecting your interests in the sale. Call the Philadelphia offices of Holmes Business Law now at 215-482-0285 or use our online contact form to get started on your partnership modification or sale. |
AuthorSarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way. When you're looking for a business lawyer in Philadelphia, the Main Line or New Jersey, we can help. Categories
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