Starting a new business can be an exciting experience. It can also be a little scary because there are always risks involved. Careful planning is essential for any potential new business venture. By doing your “homework,” and being prepared, you can avoid unforeseen situations and get your business off to a smooth start.
First and foremost, do your research! Knowing the industry that you are about to be involved in is key. You may think that your idea is the best thing since sliced bread; and it may well be. Market research, however, can be helpful in determining potential competitors as well as supply and demand. It would be crushing to sink your hard-earned money into a product or service only to realize that the market has been saturated or there really isn’t a need, making it difficult to attract business and make money.
It is also important to understand your target demographic. Is the consumer you are interested in need and/or want your product or service? Will you be able to offer a quality and affordable product or service to your target consumer and still make a profit? If consumers aren’t onboard with your idea, you may want to rethink your plan.
Certain legalities also come into play when starting your own business. The way your business is structured can dictate legal requirements, obligations and restrictions. Different types of business formations require specific licensees, registrations and filings. Depending on your business, you may need to apply for an Employer Identification Number (EIN), obtain a business license or get insurance. Some of these considerations vary by industry and state of operation.
There are also personal liability and tax ramifications that need to be explored before making a final decision. It is very important to know how the formation of your business affects your personal liability. If not, one bad situation could possibly wipe out what you have worked so hard for. Sole proprietors can fall into this category and need to make informed decisions.
Do you need a business plan? In a nutshell, yes! There are several reasons for a potential business owner to create a business plan. Quite simply put, a business plan is nothing more than a document outlining the basics of your business, i.e. products, services, finances, marketing, goals, timelines, feasibility and strategies. A carefully thought out business plan can help you stay on course. It serves as a “blueprint” to address every aspect of your business from inception to reality to, eventually, growth.
A business plan is especially important if you are considering bringing in partners, approaching investors and/or applying for a business loan. Banks, as well as potential business partners and investors, want to ensure that they are making a wise investment when loaning or investing money.
Is it necessary to hire an accountant? That depends. If you are a “hands-on” business owner and are involved in the day to day activity of your business, you may find that handling the finances can be a bit much. Often business owners find that they can save money by taking care of their own finances. That is true, but it is important to weigh the pros and cons. By doing your own accounting, however, you run the risk of not being able to give it your full attention.
By delegating this task to an accountant, you may actually save yourself money. An accountant’s sole purpose is to make sure that payroll and bills get paid but, just as important, that you get paid! A good accountant will also keep you apprised of your financial situation and can prepare “visuals” in the way of charts and reports to keep you informed of your company’s financial situation and cash flow.
Hiring an accountant immediately may not necessarily an absolute. You may be a whiz at the number game and find it manageable. If that is the case and it works for you, great! If not, it is best to leave it to someone in the accounting field. Remember, a good accountant can give you strategy tax advice that could save your business thousands of dollars.
These are just some of the considerations that should be on your radar when you are ready to start your own business. Again, it is always best to be prepared when venturing out on your own. Consulting with an attorney beforehand can set you on the track to “doing it right” the first time.
Trademarks and copyrights both serve to protect the legal rights of business entities and/or individuals. They are not, however, interchangeable. That being the case, it is extremely important to know the difference between the two.
A trademark is a legal way to protect the unauthorized use of a unique and recognizable design or expression of words, which serve to identify the source of a product or service of a particular entity. A trademark owner can be an individual, a business or any legal entity. Trademarks are often displayed on packaging, letterhead, places of business or directly on a product. Trademarks serve to distinguish an entity’s product or service from another entity’s for the purpose of capturing the attention of consumers. Trademarks can be an invaluable advertising tool.
Copyright grants exclusive ownership and authority to distribute an original “creative work.” Typically, copyrights are not necessarily “absolute” and are subject to limitations and exceptions, including fair use. Copyrights are limited to the protection of an original “expression” and not the underlying concepts that go along with it.
Copyrights are considered to be “territorial rights.” What this means is that they do not extend beyond their jurisdictional territory; specifically, from country to country. Each country is governed by their own copyright laws although there are some instances wherein international copyright agreements may come into play.
One major difference between trademark and copyright, aside from what they each protect, is the length of time that they are in force. Trademarks are legally enforceable for an undetermined period of time as long as they are continually in use and active, though a formal registration needs to be renewed at regular intervals. On the other hand, copyrights are enforceable for the natural life of the creator plus and additional period of time, generally 70 years after the original creator’s death.
Additionally, some trademarks are eligible for protection by copyright if they meet certain criteria. Confused yet? To find out how to best protect you work product, it is always best to consult with a legal professional to determine what is best for you. Contact our office for a phone interview to see if we can help with your copyright or trademark.
Restrictive covenants are agreements often made between employers and employees/contractors, as a condition of employment. They are not uncommon and are designed to safeguard the business owner from scenarios which have the ability to compromise their interests. Two such agreements are the non-disclosure agreement and the non-solicitation agreement.
A non-disclosure agreement is, essentially, an agreement that ensures confidentiality, insofar as the business is concerned. Employers want to ensure that their employees/contractors don’t disclose sensitive information regarding trade secrets or other data that would give a competitor an unfair advantage.
A non-solicitation agreement is an agreement wherein an employee/contractor is prohibited from soliciting or approaching customers/clients as well as other employees of a present or past employer for competitive business purposes.
In theory, and on paper, these restrictive agreements are beneficial to employers. The million-dollar question is, however, are they enforceable? The answer is… YES! The two-million-dollar question is, is it worth it? The answer to that is… MAYBE!
These agreements are definitely enforceable, as a matter of law. The problem, however, it that once an agreement has been breached, the damage has been done. Should a business owner cut his/her losses and move on without enforcing the agreement? Or should he/she spend time and resources litigating the breach of contract? That is a determination that has to be made by individual business owners.
In this day and age, employees don’t work for one employer for 30 years and then retire, as in years past. The reality is that employees, now, frequently move from employer to employer; and take their experience and skills with them. There is never a guarantee that an employee won’t breach a contract. That, in and of itself, should not deter small business owners in their endeavor to safeguard what they have worked so hard for.
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Sarah 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.
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