When your company is new, you may find yourself overwhelmed with all you need to do, all at during a period in which time and money can be limited. As a result, you have to prioritize the things that need to be done, and figure out what you need to invest in now, and what can wait. Thankfully, there are those things that can wait – and some that really can’t. There are variations to this list based upon your industry and specific line of work, your geographic area, and related specifics, but businesses across the board will need the following items, stat:
Consult with a business lawyer and a CPA immediately. This is not the time to reinvent the wheel, confuse a professional degree and years of experience with what you find on Google, or to resort to DIY solutions, and it’s not the time to ask for a “consult,” a “quick minute” of a friend’s time, or to skimp on quality. With champagne and professional services, you really do get what you pay for. This is the time to interview the smart, experienced professionals on whom you will rely for years to help you ensure you set yourself up for success. Get referrals from friends and trusted business associates. Ensure a good fit philosophically, with advisors who can adjust to the level of handholding that you will give you greatest comfort.
You will need these experts for your legal and accounting questions, issues relating to formation, start-up and record-keeping, and specifics relating to your business, including any special permits or licenses you may need to legally conduct your business, drafting and negotiating documents, and doing a little bit of work upfront to avoid big problems on the back end. Some upfront work with these professionals will save you time, money and stress in the short and long run – but remember, you’re investing in yourself, your business and your success, so don’t cheap out or delay on the things they tell you to do.
You will also need the advice of your business lawyer and accountant regarding the appropriate business structure for your circumstances, and organize accordingly. Don’t forget to mark your calendar with annual filing deadlines! You don’t want to find yourself on the wrong side of corporate formalities. In addition to state-specific organization, the new entity will need an employer identification number (a social security number for companies), and may also need to register with a variety of other state and federal agencies. Your lawyer can help you determine which ones, and assist with the filings. Similarly, you must stay on the right side of securities laws. Issuing stock needs to be done carefully and in full compliance with securities laws. Your lawyer and CPA can assist with the required disclosures, filings and forms.
Start with a business plan. Whether you’re looking for investment dollars or just looking to succeed, it makes sense to draft a business plan. I’m asking this question so frequently that I even wrote an article about how a business plan maps your road to success. I won’t belabor the points made in that article here – I’ll just refer you to it for a primer if this news to you, or a refresher if you’re already familiar with the issues raised in that earlier article. The bottom line is this: Nothing forces you to think your idea through than drafting a comprehensive business plan. You will need to scope out your industry, size up the competition, identify problems and formulate solutions, think about funding, refine your concept, consider marketing strategies, and so much more. Take the time to develop a sound business plan, fully think the issues through, execute the plan and revisit your business plan on at least an annual basis to make adjustments for the coming year.
Lock up your intellectual property. Intellectual property can consist of anything from a special or unique design or manufacturing process to a formula, special solutions you’ve come up with and source code, works of authorship to special symbols that represent your company and other proprietary information that you want to protect from use by your competitors. By applying for intellectual property protection, you may be able to restrict others from using some – or even all – of the information. The specifics regarding the scope and duration of the protection are among the issues you should address with intellectual property counsel.
If your business success relies on a unique invention or a novel spin on an existing product, the chances are good that you will need patent protection. You may also need copyright or trademark protections. The first step is to identify what you have, prioritize it for your business and then talk to an intellectual property attorney about how to safeguard that information so your company can benefit from its use. Applying for state and federal protections aren’t the end of the story, though. You will also want to talk to your intellectual property attorney about how to safeguard the information within the company, including how best to train employees on what information cannot be removed from the premises, determining who at the company requires access to certain information (and limiting that access so as to protect it from dissemination or common knowledge), and implementing safeguards to protect trade secrets.
Hire correctly. A company’s single largest expense tends to be its labor force. Before you cut costs by (mis)classifying employees as independent contractors or consultants, consider the factors for determining whether a worker is properly classified as an employee or independent contractor. The factors vary from state to state, but commonly include considerations such as: the line of work (whether it is one that is commonly outsourced, such as lawyers, accountants, and PR, or whether companies handle those matters internally, like administrative support), special skills required (i.e. whether the person is self-directed, or regularly reports to someone within the company), whether the contractor has other outside clients for whom she performs the work, the duration of the relationship, the structure of the pay, and the site and source of instrumentalities for the performance of the work (does the work happen at your office or theirs, and using your laptops / copiers / supplies or theirs). Penalties for misclassification can be severe. California imposes a penalty of $25,000 per occurrence, plus any tax differential – and that is in addition to the fines and penalties imposed by the IRS. It pays to get this right. An employment attorney qualified in your state can help navigate this often-confusing maze.
Get your documents in a row. Whether you have a product or service, the chances are pretty good that you will need a standard contract, or terms and conditions associated with your proposals or invoices. Do not expect to be protected if you merely rely on handshake deals and verbal agreements! Too much is left unsaid, and too much is not contemplated, when the parties are focused solely on price for product. Your lawyer will be able to discuss with you your business model, practices, and the industry as a whole to determine what provisions you will need in your contract. And most critically, don’t take something you find on the internet, or which is used by a friend, and expect that will do. This is not the time to cut corners and pinch pennies. A good contract will save you time, money, and stress on the back end – for years to come. It is an investment that is well worth the budget. And if you will be seeking investors and disclosing sensitive information to them about your business plan, financials, or an invention, you may also need a nondisclosure agreement to keep the information you share with them private. And if you’re doing business with others, including in a partnership arrangement, you will definitely want to memorialize the terms of your agreement.
Think carefully about equity deals. This is your company. Resist the urge to offer “equity” in exchange for marketing, PR, legal work and the like. If your idea is truly outstanding, you could be giving away a fortune – and you will come to regret it. If your idea isn’t strong, you’re not going to fool any of these professionals into doing free work for you – and to the contrary, you will expose your lack of confidence in your idea and your ability to succeed by offering a piece of the pie instead of something far less costly to you: cash. Moreover, if your business plan includes seeking investment, investors aren’t going to like that you weren’t willing to invest in your own ideas, and invest in your own success, by simply paying people’s hourly rates for the work you needed. It will also leave a smaller piece of the pie for them, and will limit the amount of help they will be willing to offer you. All of these factors limit your upside.
Going into business for yourself is one of the most exciting, invigorating and intimidating times of your life. With the exception of a few serial entrepreneurs who make a profession of starting companies, it is also the sort of thing you’re likely to do only a handful of times in your life. With careful thought to your strategy, and with the help of a few select professionals who are expert in their fields, you can save time, money and stress, and set yourself up for success in the short- and long-terms.
The foregoing is provided for informational purposes only, is not an advertisement, does not constitute legal advice or legal opinion, and does not create an attorney-client relationship. The content may not apply to the specific facts or a particular matter. You should not act or rely on any information contained in this article without first seeking the advice of an attorney licensed to practice in your jurisdiction.