Starting Your Own Business
You have a talent, you've researched the market, you've developed a business plan, and you're confident you can successfully run your own business. Now what? This article summarizes the legal considerations you should contemplate before going into business.
Licenses/permits/bonds
You must verify whether any of the States where you plan to do business require you to have a license, permit, or bond to conduct your business activity. States issue licenses or permits to some businesses to ensure the competency of the practitioners, to ensure safety of products or processes, to prevent fraud, and for various other reasons. States require certain business to obtain bonds to protect consumers from financial loss caused by the business.
Local authorities may also require separate licensing, such as liquor licenses or contractors' licenses. Additionally, local authorities may impose zoning restrictions on certain types of commercial activities in certain areas of the city.
The Minnesota Department of Employment & Economic Development and the Wisconsin Commerce Department are good places to start to determine whether your proposed business needs a license, permit, or bond.
Your Name
The name under which you do business identifies you as unique from another business. For that reason, States may require that you do business under a name not already in use by another business. In Minnesota, if you want to conduct your business in a name other than your own full, true, name, you will either need to legally organize under that name, or file a Certificate of Assumed Name (Minnesota). For example, in Minnesota, Jane Doe can do business as "Jane Doe Design" without filing a certificate of assumed name. Jane Doe cannot do business as "Doe's Design" without filing a certificate or organizing under that name. The Minnesota Secretary of State keeps records of company names and assumed names.
In Wisconsin, if you do not become a legal entity, you may register your name with the Department of Financial Institutions and the Register of Deeds in the county where you are located. If you organize but do business under a name different from your company name, you should file for a Fictitious Name with the Department of Financial Institutions.
Protecting Your Name and Product
The process of researching and registering your name in the
States where you do business helps to ensure, but does not guarantee, that
no one else is using the same business name. There have been some recent
claims against Duluth-based businesses claiming unlawful infringement upon
the names of businesses located in States far from Duluth.
If you feel your company name or the name of your product is unique and of
value, you may want to seek trademark protection from State and Federal
governments.
If you have an original product, you may want to consider a patent. If you produce creative literary, musical, artistic, or perhaps technical works, you may obtain a copyright. Patents, trademarks, and copyrights offer different types of protection to a business or person which may help protect the company's goodwill and reputation.
Legal Organization
You may conduct business and have employees without organizing as a legal entity. If you simply open your door for business, whether on your own or with your spouse, you are considered a sole proprietor. If you conduct business with someone other than your spouse, you are a general partnership. You don't have to notify the State that you are in business, unless you are conducting business under another name as noted above.
If you don't organize as a legal entity, you will be personally liable for all of the debts of the business. You may also be personally responsible for acts of your partners or employees relating to the business, even if you did not personally authorize the act. You may take out business insurance which can cover you in the event of financial loss. You should run a risk analysis to see whether the insurance policy will adequately protect you from losing your personal assets in the event of a claim against your business.
If you believe the financial risk too high, even with business insurance, you may limit your personal liability for creditors' claims by organizing as a legal entity and registering to do business in the State where you will conduct your principal business activity. You must observe certain business formalities to maintain this shield from liability. These formalities include keeping your registration current with the State or States where you do business, keeping your business' financial affairs completely separate from your personal finances, maintaining written business records, and signing business contracts in the name of the company.
Some people organize for reasons other than to have a shield from personal liability. There are several forms of legal business entities. Choosing the most appropriate business form for your needs will depend on many factors, including whether you will own the business by yourself or with others, who will manage and control the business, what type of benefits you would like to provide for employees, tax repercussions, whether you will likely seek outside investors and how much control you wish to give them, or how you wish to distribute profits and losses of the company.
Conducting Business Lawfully
You should be familiar with all laws applicable to your business before you set up shop. State and Federal governments have enacted many consumer protection laws which regulate the way a company may advertise, solicit or offer its business, extend customer credit, collect bills and otherwise deal with the general public. There are also laws designed to protect employees which may apply to your business. And of course, there are local, State, and Federal tax laws to comply with.
Once you know your legal responsibilities and strive to comply with all the rules and regulations governing your business, all you have left is to open your doors to a willing market!
The information contained in this article is not intended to be legal advice or to create a contract between the reader and the author. The reader is encouraged to seek appropriate legal counsel and not to rely on the information contained herein.