Starting and operating a successful business is difficult, confusing, and often fraught with unforeseen liabilities. Our 8 part series, titled Structuring and Operating Successful Business, the Pinwheel, breaks apart a business into 8 areas providing a simplistic, easy to understand analysis to help you make the right decisions from the beginning.
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It is obvious that to start a business, you need an idea and a name. What is not so obvious is that you also need trusted professionals by your side to guide you in the right direction.
In a time when everyone believes that everything is DIY, start-ups are skipping a crucial step in starting a successful business when deciding to take on the legal and accounting work themselves. It amazes me how many businesses do not have a business lawyer and accountant. When asked why, many business owners had the same response: money. Of course this makes sense, if you are a start-up you are strapped for cash and why not save money by doing some of the work yourself.
The answer is simple. If you spend a little more up front for the right advice, you will end up saving much more down the line. If your business is not structured correctly up front, it will cost you much more in time and money to hire a lawyer and accountant to fix the mistakes, during a time when your business should be taking off.
As a business lawyer, I believe the most important strategy a business owner can employ from the get go is building a trustworthy and loyal team, including partners, employees, lawyers, and accountants. The first thing I do when getting the initial call from a client who wishes to start a business is suggest setting up a conference call with an accountant. For whatever reason, lawyers and accountants seem to butt heads, but my thinking is the opposite. Each has a very distinct and important role. The business lawyer provides guidance as to liability and legal compliance and the accountant provides financial and tax advice.
Your business lawyer and accountant can help you from the beginning. The first and most crucial decision to be made is the selection of the legal form of the entity. This will have a variety of consequences during the life of the business. For example, it may affect whether business owners are personally liable for the obligations of the business or it may affect the family succession planning of the owners. In any event, it is paramount to consider the goals of the business and consequences in choosing a structure.
Here are some initial considerations in deciding which entity is suited best for you.
This is part 1 of Structuring and Operating Successful Business, the Pinwheel.
Like it? Stay tuned for part two: with the right employment agreement, you can memorialize and preserve the relationship with your employees, incentivize your employees, and protect against solicitation, competition, and disclosure of confidential information. Evan Sauer is a Chicago business and real estate attorney at Reda & Des Jardins, LLC a forward-thinking, technologically savvy law firm providing top-notch legal services to clients ranging from start-ups to large companies in a variety of industries. R&D's practice includes business, real estate, litigation and estate planning. Learn more at Reda & Des Jardins