Legal Tips For Your New Startup

Legal Tips For Your New Startup

Launching your new startup is an exciting time and you want to make sure you set it up for success.

It’s critical to legally protect your business and yourself from the start.  Amy M. Toepper Esq. is the co-founder of Legal In A Box Inc ( and founder of AMT Law LLC and shares these steps to successfully protect your new endeavor.

Step 1: Establish business as Stock Corporation or Limited Liability Company

Founders that incorporate provide their business and themselves with important benefits:

  1. Personal Asset Protection: Officially filing your business as Incorporated or an LLC offers the founder personal asset protection, as it limits personal liability for business debts and legal obligations to the amount the founder invested in the business.
  2. Tax Benefits: Tax savings are a key advantage to incorporating.  Be sure to consult with an accountant to determine the structure that’s most beneficial to your business and advantageous to your tax situation.
  3. Protect Your Name: Most states will not allow a business to register under the same name as another registered business.  By filing your business with the state, you are preventing competitors from incorporating using the same name.  Adding “Inc.” or “LLC” to your business name builds credibility with customers, investors and business partners.
  4. In Perpetuity: Once you incorporate, you establish the business to exist in perpetuity or until you choose to dissolve it. Ownership may transfer and continue should the owner die.  Under a Sole Proprietorship, the company dissolves under the same situation.

Step 2: Draft an Operating Agreement

An operating agreement outlines rights, responsibilities and contributions of business owner(s) and details how the business is operated.  It’s an essential document to have in place prior to launching your new business.  Always ink the deal.

Key elements of an Operating Agreement:

  1. Percentage ownership if more than one.
  2. How profits and losses are handled.
  3. How decisions about the company will be made.
  4. Who may bind the company in business dealings.
  5. How an additional owner may be added.
  6. What happens upon owner death, incompetence or withdrawal from business.
  7. Proper dispute resolution for business operations.

Step 3: Trademark Company Name and/or Logo or Mark

This is protection for your company name and/or mark or logo.  A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others.  Once registered, your name or brand is protected from being copied by competitors.

You may elect to have a  trademark filed before or after you have used your name in commerce.  Filing prior to use will assure that no one else has already protected that name and that you are not infringing on another registered mark.  This is important protection for your brand.

Step 4: Use Independent Contractor and Non-Disclosure Agreements

Startups often hire independent contractors to establish their business.  It’s important to discern the difference between an employee and a contractor as there are specific labor and employment laws that must be adhered to for employees.  This includes liability protections for the business.  This includes having a Non-Disclosure Agreement where you are afforded protections and privacy for your customers and business operation.

Hiring independent contractors may be more efficient at the outset but it’s important to establish your business relationship before work begins.  This protects both parties should either choose to go their separate ways and clarifies details in writing.  If it’s not in writing, it didn’t happen.

Key Elements of Independent Contractor Agreement:

  1. Establish this as a “work for hire” arrangement, establishing your company as the author for copyright/IP purposes and assures the company owns the work product.
  2. Establish terms including dates for work to begin and/or end and payment terms, including timelines, deadlines and expectations.
  3. Explicitly state contractor is “not an employee” and outline contractor is responsible for their own taxes, insurance and benefits. This also includes ability of contractor to complete outside work.

Step 5: Hire an Attorney

Establishing a relationship with a trusted attorney to provide guidance and assistance with your new startup helps you avoid legal issues. An attorney with a focus on business law assures you can keep your legal house in order.  Far too often, small businesses have legal questions and concerns that go unanswered.  These questions often turn into larger, sometimes crippling problems, later down the line.  They are always expensive and timely to fix later.

Amy M. Toepper is an attorney with more than 17 years of experience.  Amy is the owner of AMT Law, LLC and a co-founder of Legal In A Box,  Amy is a native-born Chicagoan and holds a Bachelor of Arts from Loyola University Chicago and a Juris Doctor from Loyola University Chicago School of Law.

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