Over the course of many years, clients have come to us after opening their businesses only to realize that they had not sufficiently protected their legal interests. In those situations, insufficient business planning had led to unforeseen liability against the company. In order for your business to get off on the right track and stay on the right track it is incumbent upon any new business to do the following:
1. Hire a good attorney. While this may sound a bit self-serving, hiring a good attorney can really help to protect your new business from a variety of unknown hazards. The hesitancy to hire an attorney, more often than not, grows out of a client's belief that a small business, unlike a large business, does not need an attorney. In certain cases, this hesitancy may be based strictly on financial considerations. From advising on the correct business structure for your business to developing useful human resource guidelines, the hiring of legal counsel is the best first step your new business can take.
2. The proper business structure. Having the right business structure is the foundation of any successful business operation. Whether to organize your business as a sole proprietor, S corporation, LLC, or partnership is fundamental to the future success of your enterprise. The decision of which structure to utilize is dependent on a host of different factors including, but not limited to, the business' overall exposure to liability. Other considerations such as tax implications play a determinative role in deciding what business structure fits your particular business.
3. Proper tax filings. Nothing hurts a new small business more than having to pay unexpected business taxes, resulting in penalties and, in the worst case, a shutdown of the business. Whether you pay sales tax or other taxes will be largely dependent on what kind of business structure you use to operate your business. On the issue of payroll taxes, small businesses are required under both state and federal law to be fully compliant in collecting and reporting payroll taxes. Any failure to adhere to state and federal requirements will result in penalties and potential business closure.
4. Failure to create appropriate human resources guidelines. Many small or start-up companies get into hot water when they do not have the requisite employment manuals/handbooks to assist in the management of company personnel. Take the time to hire legal counsel to create the appropriate manuals/handbooks for your company. Additionally, counsel will ensure that you are in compliance with all federal and state wage and hour regulations and postings.
5. Protecting customer data on the company website. This is an important consideration. Many new companies overlook this very important requirement. Small businesses get hacked all the time. With hacking, comes the loss of sensitive company data and confidential employee information. Make sure that your company implements the appropriate protection (i.e. Site Lock) to protect the ly important client and company information.
6. Employee use of the internet during work hours. This relates to a matter of protecting customer data. As a practical matter, it is impossible to stop employees from using the internet. The only thing a company can realistically do is to limit the time and manner that employees use the web. With that said, make sure that your company has put certain filers in place to block unwanted material. Your company should also consider monitoring employee website usage to ensure that such usage is consistent with the terms and provisions of the employee handbook/manual.
7. Obtaining the proper patents, copyrights or trademarks. Another potential landmine for small businesses. Without having the necessary protections in place, your company's intellectual property could be highjacked by a competitor or large company. Make sure that you obtain the services of a skilled intellectual property attorney to provide you with an assessment of your intellectual property needs. This needs to be done before your new business opens for business. As well, and depending on the particular kind of business, your employees must be required to sign a non-disclosure agreement so that when they leave they are prohibited from taking your proprietary and confidential information with them.
8. Make sure that your company registers with all appropriate state commissions. This requirement will depend on your company's business structure and the specific nature of your company's business. For example, you will need to register with the Commonwealth of Massachusetts Division of Employment and Training regarding the ployment insurance tax. As to other state and municipal requirements, this is another reason to obtain good legal counsel.
At the Katz Law Group, we have worked with many businesses over many years. Using our deep knowledge that comes from both trial and business experience, we help our clients craft the right business model. Please contact us at 508-480-8202 to inquire as to how we can help your business get off on the right track.