Tips on Setting Your Business Up for Success
The surge in entrepreneurship has continued to boom in the wake of the pandemic. A U.S. Census Bureau report showed that in 2020, Americans filed paperwork to start 4.3 million businesses—a 24 percent increase from the year prior— the largest increase in at least 15 years.
Attorney Jim Carroll of the Carroll Law Firm in Anthem, and a member of the Preferred Businesses at Anthem networking group, offered some advice for those considering beginning a business endeavor of their own.
Protect yourself from liability.
Establish an entity such as a limited liability company (LLC) or a corporation, such as an S corporation, which still works like an LLC, but avoids double taxation on corporate income. Carroll says the LLC is preferred by the overwhelming majority of small business owners, due to its ease of set up, but the key benefit of either of these two structures is protection of your personal assets. “Essentially you want to limit the risk to only the assets of the business,” he said.
Establish an operating agreement.
If entering into a joint venture with a partner or multiple partners, Carroll stressed the importance of spelling out the rights and responsibilities/roles of each of the parties. This allows for early and essential communication about expectations, and its main purpose serves to protect members rights and lays out the details of the equity agreement. A formal operating agreement can be drawn up by an attorney, especially if the equity interest differs between partners. The agreement can also include considerations many partners don’t often think about at the formation stage, such as future dissolution of the business or partnership, and even death.
Choose your name carefully.
Before you settle on a legal business name, it’s a good idea to search other names that are out there to avoid infringing on another businesses trade name or trademark rights and avoid costly litigation down the road. Be sure to research names in your state as well as within the same industry and in any other state or country you intend to conduct business in. A trade name for the business can be different from your corporate name or the name of your LLC.
Carroll notes that while hiring an attorney isn’t required to set your business up, it can help avoid legal issues and problems in the future. He recommends consulting an accountant to discuss the business structure with regard to taxes and getting the business books set up correctly on the first day of conducting business.