How Legally Protecting Your Biz Will Actually Save You $

So, you want to start a business. But it’s going to cost you, right? You have to form a business entity, open a business bank account (hello fees), hire a bookkeeper, get your contracts in order, register a trademark for your name = $$$$. But what if I told you, while all of those things do cost money, they will undoubtedly save you so much more in the long run. 

Let’s tackle the three big ones one at a time:

Forming Your Business Entity

There are a number of reasons individuals choosing to start a business would want to form an official business entity (LLC, Corporation, S Corp, etc.). Most believe the main reason is strictly for the tax benefits. But, in actuality, there are HUGE legal benefits to doing so. For example, by setting up an LLC as opposed to operating as a sole proprietor, you are proactively shielding yourself from liability related to your business. If someone chooses to sue you for anything having to do with your business dealings, they will sue your LLC and not you personally. That means all of your personal assets (house, car, etc.) are protected from becoming part of such suits. Talk about saving your well-earned money/assets! One thing to note is you can’t just form your LLC and hope for the best. You have to show that your business dealings do not operate as part of your personal dealings. Make sure all of your business funds, accounts, etc. are maintained separate to your personal finances. No fund commingling! 

Registering a Trademark For Your Name

Ok, not gonna lie. The application and hiring an attorney to walk you through the process is expensive. More expensive, though? Not registering and I’ll tell you why. 1) A trademark is an asset that increases the value of your company. For example, if you ever wanted to sell, not having federal protection for your name/logo/tagline may reduce the overall valuation of your company (goodbye future coins). 2) Without a trademark, you have no *exclusive* brand protection to operate (and dominate!) your market. You would not be able to prevent other companies from using your name/logo/tagline and profiting from that use (for the same or similar goods/services). You lose those customers, that other company makes the money. It gets worse, folks. 3) If you don’t perform the appropriate searches to find out if the name you want is already taken, you could be inadvertently using someone else’s trademark. This means you’ll have to head back to the drawing board. Depending on where you are in your biz journey, the costs of rebranding could be steep! New packaging, new logo, website relaunch & redesign, new marketing materials, etc. 4) Lastly, and possibly the worst-case scenario, if you are accused of using another company’s name, you may have to defend any legal actions taken against you by hiring an attorney ($$) and you may be ordered to pay damages to that company. Yikes!

Having the Right Contracts in Place. Where do I start with this one? As an experienced contract attorney, my job is to essentially be a doomsday prepper. I have to think of all the possible ways a relationship can go wrong, so I can properly and financially protect my clients via a contract. A properly drafted agreement should, in general, lay out the rules for what happens if someone doesn’t (or can’t) keep up their end of the bargain and the effects on both parties financially to remedy that.  I know we all want handshake deals. Or perhaps, we’re afraid to put things in writing because maybe that heightens our responsibilities. But I promise you, it is in everyone's best interest to have it all in writing. It also shouldn’t be a contentious situation. Not all contract terminations arise from a fight to the death, sometimes one party just isn’t able to continue based on circumstances beyond their control (hi, pandemics). Whatever the reason, you would not want to lose money because you weren’t properly protected under your agreement.

With that in mind, you can see how ensuring your business has the right legal protections in place can actually save you loads. As you continue your business journey, take stock in your dealings and consult with an attorney to make sure you’re adequately protected. 

Any information provided in this article is intended for general informational purposes and is not intended to be, and shall not be relied upon, as legal advice. Pamela Rosario, LLC ©