Getting your business off to a great start at the beginning of the year is a wonderful feeling; but do not spend all of your time watching the bottom line while forgetting to legally protect your business as you continue to grow.
Here are five things that you can do to better protect your business in 2018:
Form A Legal Entity
If you operate your business as a sole proprietorship or a partnership, your personal assets could be at risk as a result of liabilities incurred through your business. If you get sued, your home, car and bank accounts could be in jeopardy.
Instead, think about forming a limited liability entity like a corporation or a limited liability company. While you should take great care in deciding which entity type is best for your business, a limited liability entity can provide you with some measure of protection from your business liabilities, helping you to sleep much better at night.
Protect Your Intellectual Property
Whether your business focuses on cutting-edge technology or selling flowers, almost all of today’s businesses own some intellectual property.Intellectual property includes items like trademarks (i.e. your business name or logo), copyright-protected materials like your website content and marketing materials, trade secrets (those proprietary secrets that give you a competitive edge over your competition) and patents.
Your intellectual property is valuable and in 2018 there are more ways than ever for others to infringe upon your rights and capitalize off of what you have worked so hard to create.
There are a variety of ways to protect your valuable intellectual property, whether that be through trademark registration, copyright registration, patent registration, the formation of a trade secret protection plan or even a comprehensive intellectual property protection strategy if you own multiple forms of interrelated intellectual property. Talk to someone knowledgeable in the field to help you implement the necessary protections.
Get It In Writing
Contracts…I know, to some, written contracts seem overly formal and in some ways insulting to the party with whom you are dealing; as if it is somehow a message to the other party that you cannot trust them. However, a written contract should be seen simply as a document which clarifies the relationship between two parties and strengthens those points upon which the parties have already agreed.
Contracts are important for both parties to protect their respective rights and often, at the end of the day, help to prolong the relationship between two parties rather than weaken it. I have seen many business relationships fall apart because of misunderstandings that occur because basic deal terms were not put in writing from the beginning. And, in some cases, like real estate purchases, no deal exists unless it is in writing. A contract does not have to be overly formal or lengthy, but it should contain at least the basic terms of the deal in sufficient specificity.
Properly Characterize Your Personnel
Is that person working for you an employee or an independent contractor? Well, unfortunately it is not up to you to decide. Whether someone works for/with you as an employee or an independent contractor depends on the federal and your state’s interpretation of both. Usually the factors involved in making the determination revolve around how much control you have over individual (i.e. do you dictate the hours they work, the location where they work, how they perform the work, the equipment they use to perform the work).
Properly characterizing your personnel is very important so that you are in full compliance with federal and state law. A mischaracterization, which results in the failure to make proper payroll withholdings for those personnel who should be treated as employees, can result in you having to make catch-up payments for years in which employment taxes and insurance were not properly paid, in addition to penalties.
Create and Implement Employment Policies
Whether you are a big or small business, if you have employees you should also have employment policies. The policies do not have to be elaborate, but there should be clearly established expectations and guidelines put into place that your employees should follow. Once created, you should have your employees carefully review the policies, have them agree to the policies in writing, make sure that each employee has a copy of the policies and that there is a copy of the policies accessible in the work place at all times and enforce the policies fairly, showing equal treatment to all.
If you find yourself in the unfortunate situation of having to terminate a difficult, non-compliant employee, being able to show that you have formal, established policies that the employee agreed to before the violations occurred, can save you a lot of grief and potential liability for a wrongful termination.