The Business Owner’s Protection Guide

By Attorney Robbie Crosier

As a small business owner, protecting your assets and avoiding personal liability are top priorities. This quick guide provides a simple overview of legal strategies that can help achieve these goals, including the importance of incorporating your business, protecting your intellectual property through trademarks and copyrights, and implementing fundamental contracts.

Table of Contents

• The Value of Incorporation

  • LLCs and Personal Liability

  • Maintaining Corporate Formalities

• Protecting Intellectual Property

  • Trademarks

  • Copyrights

• Essential Contracts for Small Businesses

  • Service/Sales Agreement

  • Independent Contractor/Employment Agreement

  • Website Policies

1. The Value of Incorporation

LLCs and Personal Liability

One of the most straightforward ways to protect personal assets is by forming a Limited Liability Company (LLC). While other options for incorporation exist (such as forming a corporation), we find that LLCs are the best choice for the vast majority of small businesses.

• Asset Separation: An LLC separates your personal assets from your business assets. This means that in the event of a lawsuit against the business, your personal assets—like your home, personal bank accounts, and other valuables—are shielded from any judgments.

• Tax Flexibility: LLCs also offer various options for tax treatment, potentially resulting in lower tax liabilities compared to other forms of business ownership.

Maintaining Corporate Formalities

However, the protection offered by an LLC doesn’t come without some effort. In order to keep your LLC “bulletproof,” you need to follow some procedures called “corporate formalities.” Corporate formalities for an LLC include the following:

• Operating Agreement: Every LLC should have a well-drafted operating agreement. This document outlines the rules, regulations, and provisions related to the business, adding another layer of formality and protection.

• Separate Business and Personal Bank Accounts: Separate bank accounts for business and personal finances are essential. Commingling funds can risk "piercing the corporate veil," thereby compromising the protections offered by the LLC structure.

• Annual Meetings & Minutes: While LLCs are not always legally required to hold annual meetings or keep minutes, doing so can help maintain the distinction between your business and personal affairs.

2. Protecting Intellectual Property

Trademarks

A trademark protects brand identifiers such as names, logos, and slogans.

• Legal Protection: Having a registered trademark significantly bolsters your legal standing in the event of infringement, making it easier to take legal action and claim damages.

• Brand Recognition: A registered trademark can dramatically enhance your brand recognition and offer exclusive nationwide rights to use the trademark in connection with your goods and services.

• Registration Process: To register a trademark, first conduct a comprehensive search to ensure no one else has registered a similar trademark. Then, apply to the United States Patent and Trademark Office (USPTO) through their Online Portal. Post-approval, you must continually use the mark in commerce and file maintenance documents to keep your registration alive.

Copyrights

Copyrights protect original works, including literary pieces, music, and artwork.

• Legal Protection: Just like a trademark, having a registered copyright strengthens your legal position in the event that you need to enforce your intellectual property rights against potential infringers.

• Exclusive Rights: Copyright grants you the sole right to reproduce, distribute, and display your work. This can serve as a revenue stream through licensing or sales of the work.

• Registration Process: The copyright registration process is similar to the trademark process. The best way to register a trademark is through an online filing with the US Copyright Office through their Registration Portal.

3. Essential Contracts for Small Businesses

Service/Sales Agreements

• Clarity and Protection: A well-drafted service or sales agreement outlines the responsibilities of each party, payment terms, deliverables, and what happens in the event of a dispute. This offers legal protection and sets clear expectations for both parties.

Independent Contractor/Employment Agreements

• Clearly Defined Roles: These agreements stipulate roles, expectations, compensation, and termination conditions. They are vital for protecting both the employer's and the employee's or contractor’s interests.

Website Policies

• Privacy Policy: This is a legal requirement if you collect any data from your users. It describes how you collect, handle, and store data, ensuring transparency and building trust.

• Terms and Conditions: These rules dictate how visitors should use your website and what happens if they don't comply. It can limit your liability and protect your rights to the content on your website.

Conclusion

Building the right legal foundation for your small business requires a little work, but can save you tens of thousands (or a lot more) in the long run. By incorporating as an LLC, safeguarding your intellectual property, and employing well-crafted contracts, you're setting your business up for long-term success regardless of what comes your way.

Need some help putting all of this together? Book a free consultation with us today, and we’ll get your business taken care of.