Making the step from hobbyist to small business owner is exciting proposition. Starting a small business opens up a new world of possibilities, but also brings a bit of legal complexity. To ensure that you and your small business are receiving the best treatment available. Fortunately, the small business owner is protected by United States legal code which is dedicated to small business law questions. Below are a few legal for small business owners to ask in their small business entrepreneurial endeavor.
How Should My Company be Structured
A common legal question that small business owners ask is how should they structure their business. Small businesses can be structured in a number of different ways. Some of the common corporate structures of businesses include:
- S corporations
- C corporations
- Sole proprietorships
Even though a partnership or sole proprietorship is easy to form, unfortunately, these forms of corporate structure often offer very little legal protection. It’s worth the work to form a corporation or LLC. LLCs protect your assets from lawsuits and enable pass-through taxation, as do S corporations. Also, LLC’s don’t have to file tax returns if they are single managed.
Incorporate in the Right Place
Another legal question for small business owners is where should they form their corporate structure. Most states require that you form your corporate structure where your physical business is located, but some states have specific incentives. States like Delaware, a “corporate haven,” attracts many businesses with its low corporate tax rates. Unfortunately, incorporating in Delaware comes with an annual tax of $250. A major positive of forming your company as domiciled in Delaware allows you to take advantage of streamlined set of corporate laws. States such as Nevada, Wyoming, and Alaska are also considered corporate havens.
I Have an Idea, How Can I Protect it From Being Taken?
United States business law allows you to patent your idea, which makes your idea your intellectual property. If someone attempts to use your intellectual property for their benefit, then you can sue to force them to stop using your idea and pay you anything they earned in the process. To complete the patent application process, it’s important to have a detailed record of your inventions creative process ready. Your patent notebook should be signed and dated, and you should have two witnesses prepared. Also, make sure your product qualifies for a patent and that the idea is financially worth patenting. The whole patent process can cost as much as $1,500! There is however, another route. A number of entrepreneurs use the part of small business law that include copyrights and NDAs which can protect ideas that don’t qualify for patents.