Top 10 Legal Tips for Starting a Business Heading

By: Michael Safren, Esq.


Starting a new business, whether the provision of personal services, the operation of rental properties, or a technology business, can be challenging.  Before striking out on your own and starting your own business, here are 10 tips from a business attorney to help you avoid conflict, stay on track, and survive the inevitable challenges that arise in any commercial endeavor. 


1.  Select the right business structure.  Different business structures offer differing levels of protection in terms of your ability to shield your personal assets from business liabilities and offer different tax advantages. Selecting the appropriate business structure can protect you from creditors and minimize your tax obligations. 


2. Obtain insurance.  Business insurance is a necessity for most companies, but especially important if you are operating a business that is susceptible to large liabilities.  Having the right insurance policy can protect your business in the event of an unforeseen claim. 


3. Get Everything in Writing.  All agreements with independent contractors, employees, vendors and customers should be in writing to help avoid misunderstandings and to clarify the obligations of the parties to each other.  


4. Partners, Members, and Shareholders need a buy-sell agreement.  If you are operating as a Partnership, Limited Liability Company, or a Corporation, it is critical to plan for what happens if any one of the other owners becomes disabled, divorces, dies or simply wants to leave.  A buy-sell agreement plans for such contingencies and should be included in the Partnership Agreement, Operating Agreement, or Corporation By-Laws or can be a stand-alone agreement. 


5. Understand the Different between Contractors & Employees.  Washington’s Department of Labor & Industries uses a more restrictive definition of Independent Contractor than does the IRS.  Failure to correctly classify Employees and Independent Contractors could result in penalties and interest on unpaid premiums. 


6. Follow the Required Formalities of the Business.  If you are operating a limited liability company or corporation, there are legal formalities that must be followed in order to keep the asset protection provided by these entities in place including having proper entity paperwork, filing annual reports, and keeping the business separate from personal assets. 


7. Protect intellectual property.  You should protect your own intellectual property by filing necessary trademarks, copyrights, and patents.   You will also need the proper legal documentation for confidentiality and non-disclosure agreements to protect you trade secrets and protectable intellectual property.  Further, you also need to ensure your business does not infringe on the intellectual property of others.


8. Create and Use Proper Employment Agreements.  Washington recently passed legislation limiting the use of non-compete agreements.  Having an improperly drafted or out of date agreement offers little to no protection. 


9. Have legal disclaimers on your website.  If you have a website, be sure to include Terms of Use and Privacy Terms pages that detail the responsibilities and rights of each party.


10. Use Professionals to Assist You.  Every new business needs good legal and financial advice.  A good business attorney will help you identify problems down the road that could potentially derail your new enterprise.


Michael Safren is a Partner at The Law Offices of Jenny Ling, PLLC.  His practice focuses on business, real estate, and civil litigation.


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