Running your own business is an exciting but challenging prospect. In addition to wearing many hats, it’s also important for small business owners to perform the necessary hygiene to maintain business ownership. Here are several essentials from the experts to help protect your business and ideas:
Make sure your “mark” is available. This is the name or brand by which your business will be identified. “Have a trademark clearance search conducted to ensure the mark is available and that no one has registered or applied for it and or has a confusingly similar one,” says Herb Williams, trademark and copyright attorney at Washington-based Foley and Lardner. Once available, file a trademark application with the U.S. Patent and Trademark Office.
Establish a business entity and obtain an Employee Identification Number (EIN). You can choose to operate as a sole proprietorship, partnership, limited liability corporation of a cooperative. Each designation carries certain rights and protections. Your EIN is used for most of your business needs, including opening a bank account, applying for business licenses, and filing a tax return. For more information, visit the IRS Website. Have employees use the company’s name–never your own or theirs–when conducting company business. This helps build brand name recognition and prevents employees from taking resources and, potentially, clients when they leave.
Hire a professional or specialist. You wouldn’t go to a podiatrist for a heart condition; similarly you need the right specialist for your needs. Obtaining a trademark or copyright clearance, for instance, is a complex, time-consuming process as is wrangling financial agreements. Rather than do-it-yourself, hire a CPA for business needs and an attorney who specializes in the area you need assistance. Ed Polk, Intellectual Property attorney at Washington-based Foley and Lardner says, “If certain documents are filed improperly or there’s a lack of expertise, something vital may get missed and you may lose an opportunity or get beaten to the punch.”
Set aside a realistic operational budget. Understandably, many small businesses lack the extra capital for vital but seemingly extraneous costs. Trademark searches, for example, run from $2,000 – $3000, filing an application is $500-$700, and the cost of defending your mark or business ownership is significant and unpredictable. Williams stresses, “You may save money short-term, but as the business grows it may prove costly.”
U.S. Trademark rights are jurisdictional and based on common-law usage. Here, the right of ownership goes to the first to use it, not the first to register it. Moreover, U.S. rights do not grant the same rights in other countries. Williams explains, “Each country has their own trademark scheme. Europe has a single application that covers all countries in the European union, and even then there are nuances.
Execute necessary contracts and agreements. Asking your uncle or best friend to sign a contract is cringe-inducing. Williams suggests treating it like a business from the very beginning to circumvent hurt feelings and suspicion. Barring that, James Conley, clinical professor of technology at Kellogg School of Management suggests “keeping a record that serves as evidence of intent and memorializes your account of what was agreed upon.” Though not legally binding, this coupled with an oral contract puts you in good stead. Conley also suggests purchasing a boiler plate contract through a software program and individualizing it to fit your needs.
Regular stocktaking on intangible assets. These are ideas, expertise, pricing incentives and any other techniques significant enough to file legal copyright or patent protection. Conley advises, “Make employees aware of and request that they sign confidentiality agreements.”
Make a clean break. Should your partnership end badly, take care how you reference your old business as you transition. Over usage of the old name or product (either from bitterness or to connect old customers) may leave you open to legal action.