Small business owners know that no detail can go overlooked. But in the midst of budgeting and planning, the legal aspects can sometimes be brushed aside. We spoke with local attorneys to learn what someone starting a small business should know.
For starters, there’s the business idea itself. “Protect your intellectual property so that other companies don’t steal your inventions, ideas or brand,” recommends Elizabeth Sigety, partner at Fox Rothschild LLP.
Christine A. Reuther, shareholder at McCausland Keen & Buckman, agrees. “Many small business operators make the mistake of plunging into a new business without doing a substantive business plan,” she says. “People starting businesses tend to have great ideas and want to realize their visions without realizing that the underlying business operations are as critical as the vision.”
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Sigety also suggests that all owners of a business get on board in the beginning. “Set out in a precise, signed agreement the details of the arrangement between the owners of the business,” she says. “As for the agreement between owners, typically the founders of the company get along great in the beginning but, as time goes on and the company evolves, the founders’ memories of what was the deal and perceptions of what they deserve frequently change — which can result in disputes between founders.”
W2 vs. 1099
Ian Meklinsky is also a partner at Fox Rothschild LLP, and he stresses the importance of deciding early on if you’re hiring employees or contractors — and understanding what the difference is.
“This decision, if made hastily, can cause significant financial problems later. The failure to properly characterize an individual can result in back wages being owed to the individual and a significant amount of taxes being owed to the government,” says Meklinsky. It’s one of the biggest mistakes he sees — but it’s also one that can be avoided.
Reuther tells us what to ask at the beginning.
Who: Who is involved? Will there be partners? Will there be employees?
Where: Where will you be doing business? In your house or a rented space? Is it going to be an Internet business? Where will employees be working?