If you have a product that you want to sell, you have an idea for a service that you want to provide, or you want to purchase an existing business, the initial and most important stage is planning. For a business to be successful the market for the product or service, the structure for the business entity, and the operation of the business must be thoroughly researched. The reason that many new businesses fail economically is because they have not analyzed their market, capital needs, business operations, and labor needs and costs. A business plan is an organized method for evaluating the purpose of the business, its goals and objectives, its capital, labor, and equipment needs, and an operational method for profitability.
Do you need to form a business entity, and if so, what type?
The law does not require any particular form of business entity, but it does provide for several different forms of businesses. The simplest form of business entity is a sole proprietorship which is not an entity at all. The owner can give the business a name and use that "assumed name" which should be registered with the Secretary of State in the State(s) where the business is conducted. This form of business structure does not provide any personal legal and financial protection for the owner from creditors or others who may assert a claim against the business or its owner. Most business owners create corporations and limited liability companies as the business entities through which they do business. Other business owners create general partnerships through which they operate their business. Other less commonly used forms of business entities are limited liability partnerships, professional organizations, cooperative associations, and business trusts.
What do you need to do when starting your business?
If you are selling a product, you need to protect your investment by applying for a patent and applying for trademarks. Additionally, you want to copyright materials that you develop. If you are forming the business with two or more individuals or companies, you need a contract between the parties that specifies the ownership interest that each individual has, that specifies the value of each individual's investment in the business, that identifies the capital, time, intellectual property, and other property each individual is contributing to the company, that specifies the terms for sale of an individual's ownership interest in the event that he or she desires to sell his or her interest or he or she dies, that specifies how the business will be managed, and that specifies the compensation for the owners. As part of the business plan, you need to determine the market for the product or services. You need to identify who will be performing each critical function and whether or not you will employ individuals or subcontract with individuals or businesses to perform certain tasks necessary for the business to be productive. You need to identify individuals or business that will provide legal, accounting, and technical and business support for the business entity. It is important to consult with lawyers and accountants prior to beginning operations. It is less expensive over the long term to use preventative law and accounting than to suffer the consequences of not using good contracts, not knowing or following the law in business dealings and operations, and not following sound accounting practices and fiscal principles.
What happens when someone breaches a contract or claims that you are liable to them for money or the breach of a contract?
In every business problems will arise. Less problems will arise if you follow good business practices and sound legal and accounting principles, but, nevertheless, the inevitable problem will arise (and usually when you can least afford it in time or when you cash flow is low) when you need to know your legal rights and obligations. In those times you must find a lawyer who listens to you and represents your interests. You must find a lawyer who will act in your best interest and give you the best advise possible, even if it seems to be very expensive. No lawyer can know everything; therefore, you want a lawyer who will admit that fact and be willing to gather the facts and research the law before giving you an answer. You need well-reasoned answers upon which you can base your decisions; you do not need an answer that the lawyer can give you that is off-of-the-top of his or her head, simply because it is quicker and easier for him or her or less expensive for you. Employing professionals is like everything else; generally, you get what you pay for. Lastly, lawyers and accountants also have business expenses, families and mortgages. Therefore, if you want the best and prompt service, you must keep your bills paid. Otherwise, he or she will be giving other clients' problems and needs priority so that he or she can generate the income to pay his or her business expenses, family expenses, and mortgages.