Steps to Start-up Success
Incorporation It is an absolute must to incorporate. If you do not, all of your personal and family assets are at risk.
Multi-Owner Businesses One day in the future you or one of the other owners will want to leave the business and cash out your shares. You need a Buy-Sell Agreement to agree on how this is to be done.
Workers If you will use independent contractors (I/C), be certain this classification is correct. You will need a contract with I/C workers. The incorrect classification can personally subject you to severe penalties and interest. Please read our article.
Board Members Board members will want to be indemnified. Anticipate this problem and give them a contract.
Insurance Obtain the correct types and amount of insurance. Besides general liability and property coverage, think about cyber-risk, disability and life coverages.
Protect your names, data and methods
Screen company/ product names with a Trademark search.
Apply for federal trademark protection.
Protect inventions through patents.
Protect IP from leaving the company by using trade secrets protection with your vendors and partners.
Use “CONFIDENTIAL PROPERTY” notices.
When service providers sell you services, they must assign their rights to you or you do not own the rights (e.g., your web site)
Contract System Create form contracts to protect your right to be paid. Businesses’ needs vary by industry.
Short-Form Agreements with Employees Every employee should sign a non-negotiable form agreement that (1) they will not ever use or disclose any company confidential information, (2) the company owns all rights to ideas developed by employee such as inventions, and (3) the employee shall not solicit any customers of the company for two years after leaving the company.
Workers Compensation Insurance Acquire Worker’s Compensation insurance for your employees. Illinois requires all employers to carry this insurance.
Follow Corporate Formalities Corporations must use certain procedures to maintain their legal shield. For example, do not commingle business and personal money. An article I wrote describes 33 such requirements. We will happily send this to you.
Business Plan and Budget Even if it’s only 5 pages and not written by a consultant, it will be very valuable to state your plan and create a preliminary budget.
Ownership of Your Website and Code Unless you have a contract with your web site designer and software developer and unless the contract states you own the code you do not own it. Get a proper contract with the needed language in it.
Lease Many important obligations and restrictions are in your real estate lease. These are often not in plain English. If you negotiate your lease well, you will avoid undue worry. Pay close attention to your lease terms.
Bank Borrowing Banks use complicated legal language in their loan documents. You can negotiate away some of these risks to prevent the bank from calling the loan. Be sure you understand these potential problems before signing. Get any loan commitment in writing.