Being a successful business owner requires a lot of good decisions made along the way. Here are our suggestions for some of the most important.
1. File Originating Documents
Whether we’ve helped you form your business, or you’re already established, you should have your formation documents in a safe place. This means your certified copy from the state, the receipt of payment, your EIN letter from the IRS, and the like.
2. Adopt Governing Documents & Review Annually
This means that you have an Operating Agreement or Bylaws that is effective and in-force. If you have more than one owner, then there’s a Buy-Sell Agreement or Shareholder’s Agreement in place as well to protect each of you in the event of death, disability, divorce, disinterest or other situations. Each year these documents should be reviewed to ensure they are still valid for the situation you are in. You should also update your records with the significant decisions, changes and actions of the prior year.
3. Implement Written Contracts
My grandfather bought his property and vehicles with a handshake at the bank. Unfortunately, those days are gone. Ensure you have solid, bespoke, agreements between you and your clients. Contracts should address the risks and rewards of your industry and should be clear enough to prevent disputes before they arise.
4. Protect Intellectual Property / Keep Your Competitive Edge
Your business is more than just the services and product you provide – it’s your brand, your know-how, your customer lists, your materials and more. Don’t let those intangible assets disappear. Protect them through copyright, trademarks and patents; as well as non-disclosure agreements, non-solicits and non-competes … and more.
5. Adopt A Recordkeeping Program
Everyone hates paperwork, but records are vital to the life of your business. Adopt a program for dealing with the myriad of items you’ll need to preserve and stick to it. You don’t want to be in a situation where you need to find a vital record and it’s impossible to locate.
6. Understand Your Tax Obligations – And Pay Them
No one likes the IRS. It’s a truism that will last forever. But another truism is that they can make your life and the life of your business a living hell. They can take your money, throw you in prison if you’ve been bad enough … and it’s not worth it. Pay your taxes. And hire a great accountant who knows the difference between being smart with your money and being too aggressive.
7. Protect Yourself – Get Insurance
Having an entity is a great safety net. Having strong contracts is a great safety net. Having access to insurance monies is another great safety net. Don’t just buy cheap insurance either. Insurance means nothing if it’s not there when you need it.
8. Don’t Forget About Cyber Threats
Even if you’re not running an online retail shop, you are at risk for cyber threats. If you use a computer, tablet or smartphone that connects to the internet, you are transmitting private data. Whether it is credit cards, social security numbers, bank account information, or even more mundane personal details, no one wants to find out you let their personal data loose in the world. Understand your risks and protect against them.
9. Comply with Employment Obligations
We tell every business owner – the best day of your life as a business owner is the day you hire your first employee; it is also your worst day. Having employees requires adherence to numerous Federal, State and local laws and regulations. There are workplace rules to create and enforce, and benefits to be offered. In addition, there are complexities in managing employees’ moods and interactions with each other and clients. And finally, you should know the difference between independent contractors and employees.
10. Don’t Neglect Legal Issues As They Come Up
It is so easy to be like an ostrich and put your head in the sand when trouble arises. Sometimes there’s comfort in avoidance. But it’s a cheap comfort and it’s short-lived. If you see trouble on the legal horizon face it head on. In addition, preventative or preemptive action is typically far cheaper than waiting until it is too late.
11. Perform estate planning to ensure continued viability of your business
Things happen. Don’t let something tragic wipe out the value you’ve been in your business for your loved ones. Make sure your business can survive your absence, or at least your family can. This is especially important for business owners who are the sole wage earners for their families.
BONUS: Begin a succession plan long before you need one
Do you want to own a business or a job? If you own a business, you can sell it one day. Maybe to a child, to a business partner, to an employee, to a new third party. But if you own a job and you’re not there, there’s no money coming in. With a succession plan in place, even a nascent one, you will be forced to focus on creating value in your business, protecting your future self.
LOVE LAW FIRM stands ready to help you when you're ready to decide to move forward.
Francine E. Love is the Founder & Managing Attorney at LOVE LAW FIRM, PLLC which dedicates its practice to Business and Intellectual Property Law. The opinions expressed are those of the author. This article is for general information purposes and is not intended to be and should not be taken as legal advice.