While the list of tasks to handle when starting a new business may seem endless, there are some crucial matters that must be handled, including those of a legal nature, to get your business started on the right foot. In this blog, we provide a basic overview of some of the matters that a business will need to address at its inception.
Business Structure: Choosing the Right Entity
One of the first decisions will be to choose the legal structure of your business. Some common options include limited liability company (LLC), sole proprietorship, partnership, or corporation. Each structure has its own taxation, liability, and operational implications that should be considered before registering a business entity or drafting any contracts.
Consulting with a business attorney can help you determine which entity best suits your goals and needs and can save you potential legal troubles in the future.
Registering Your Business and Articles of Organization
After deciding on your business structure, you’ll need to register your business with the appropriate government authorities. In Colorado, the first step is to register the business with the Colorado Secretary of State. This process is relatively simple and can be handled online. Going forward, the business will also need to file an annual periodic report with the Secretary of State to ensure ongoing good standing. The processes, regulations, and procedures for filing a new business entity vary by state.
You will also need to determine which permits and licenses may be required for the operation of your business and obtain an Employer Identification Number (EIN) from the IRS. New business registration requirements vary by location and industry, so it’s essential to research and comply with all the local, state, and federal regulations applicable to your business.
To help register your new entity, here are some additional matters you will need to consider:
Principal Office Address and Mailing Address
Where will your business run? Will you have an official office? And if so, will that be the main mailing address? It’s important that this information and your general contact information is consistent throughout all registrations that you complete.
Trade Name and Trademarks
If you wish to use a trade name for your business, you will need to register that separately after setting up the business entity, either as a separate filing or within the existing entity record.
Assigning a Registered Agent
Another important piece of information that you will need to have when registering your business is a registered agent. This is a person who has the authority to accept service of process, legal and state documents, and relay those communications to your business. This can be an individual or entity, but they must have a Colorado address. There are agencies for hire available to act as registered agents if you so choose.
For more information, you can visit the Colorado Secretary of State website, which has many resources for new businesses, including this Checklist.
Regulatory Compliance and Permits
Businesses often have specific industry regulations with which they are required to comply. Additionally, permits may be required to operate legally. These requirements may include environmental, health and safety, zoning, or professional licensing regulations, so it’s crucial to stay informed about your industry’s regulatory landscape and ensure that your business operations meet all legal requirements.
Contracts are an important aspect of a business’s day-to-day operations and can affect and determine relationships with customers, suppliers, employees, and partners. It is essential for any new business to ensure it has well-drafted documents to protect its interests. A business attorney can help you draft, review, and negotiate these contracts to ensure the protection of your interests and compliance with applicable law.
Some examples of contracts a business may wish to draft include:
Operating Agreement: An Operating Agreement outlines the general practices, purpose, and operation of a business. This document guides how a business is run, procedures for management, compensation, members, structure, tax matters, dispute procedures, and other crucial items for successful operation.
Partnership Agreement: Along similar lines as the Operating Agreement and perhaps in conjunction therewith, depending on the structure of your business entity, a partnership agreement should be drafted to clearly define roles, responsibilities, decision-making processes, and dispute resolution mechanisms for the business.
Customer Contracts: These contracts outline items such as products or services, delivery, pricing, payment terms, and other essential details to ensure smooth working relationships with your customers.
Supplier Contracts: Like customer contracts, these documents are essential for effective relationships with vendors and supplies. These contracts may specify items such as terms of purchase, quality standards, delivery schedules, and dispute resolution procedures.
Employee Contracts: These contracts can be used to address terms of employment, confidentiality, benefits and compensation, non-compete and non-disclosure clauses, and intellectual property rights. This may also include other incentive-based agreements such as Phantom Stock or commissions.
Starting a business comes with exciting opportunities and potential pitfalls, and this list does not cover every possible eventuality or need since each business and situation is unique. To protect your business and its future success, consult with a qualified business attorney who can guide you through the legal complexities from the very beginning. The attorneys at MLMW regularly work with businesses at all stages of operation to help prepare contracts, ensure regulatory compliance, handle disputes, and enact best practices to prepare businesses to navigate challenges.