Many people express interest in starting a business. From creating a new product to building an app, there is no limit to the ways you can benefit those around you through your unique concepts.
With the wealth of information readily available about your options in forming a business, getting started may be easier than ever. However, that is not to say that counsel is no longer necessary in guiding you through your business formation. Rather than waiting until a legal dispute arises, there are some things to consider as you form your business, according to James Daily’s recent article in Forbes.
Things to keep in mind as you establish your business agreements
Rather than rushing to bring your minimum viable product (MVP) to market or sign your partnership documents, it would be a good idea to seek counsel in your formation. Although you and your business partner might have an excellent working relationship now, you should protect your interests, in case something changes in the future.
When you form your business, be sure you understand your options as they pertain to:
- Your control of business profits. Many people base profits on ownership percentages, but you might want to consider how you will benefit directly from the contributions you make.
- Establishing your rights. Even if you do not have business partners, a well-written operating agreement can separate your assets from those of your business, as well as protect your rights in court if that becomes necessary.
- Where you register. Contrary to what you might believe, you can form a business in a state other than where you live. Depending on where you form your business, this could help reduce your expenses or tax liability.
- A “drag-along” clause. When multiple people are involved as owners, this part of your operating agreement can protect you from devaluing your business by requiring that all owners sell their interests to the same buyer.
- Opening your business account. After registering your business and securing your employer identification number (EIN) with the IRS, you can open your business bank account, which will enable you to conduct your business transactions separately from your own.
Although certain laws may vary between states, it is crucial to establish a strong foundation on which to build your business. In many cases, laying your groundwork is the most important part of long-term success.