Starting a new business can be a bit like skydiving. It’s a time that is exciting, fun, and full of stress and worry. Like skydiving, it also requires careful preparation to ensure that you do not fail…
Most people who try skydiving will hire a company that gives them instruction, provides them with carefully prepared gear to minimize their risk of failure, and stays with them throughout the process to ensure their success.
Attempting to start a new business without the same careful preparation and a business attorney to guide you through the process can result in critical mistakes that could cause your business to fail. Decisions like choosing the right business structure, using contracts with the right language for your situation, and even choosing the right name for the business can be key to your new company’s success.
Coastal Law, LLC’s business litigation attorneys help new and existing companies in the Myrtle Beach, Conway, Columbia, and Charleston, S.C. areas get up and running, avoid expensive litigation, and navigate the legal pitfalls of running a business.
Why Does the Type of Business Structure Matter?
Money and liability. In South Carolina, the default business entity is a sole proprietorship. If you do not file the proper documents to form a corporation or partnership, the law will automatically classify your business as a sole proprietorship. As a sole proprietor, there are no pesky legal requirements such as holding board meetings, drafting operating agreements, or separating business funds from your personal account.
There are also no protections from liability, and you will be held personally liable for your business’s debts and obligations. Corporations, partnerships, and other types of limited liability companies shield your personal assets from lawsuits and other debts that are incurred by the company. The type of business entity that you choose can also determine how you pay taxes, how much tax you pay, and whether you will be held responsible for the obligations of partners or co-owners in your business.
Why do Written Agreements Matter?
No matter how rosy things appear at the time you are entering into an agreement, odds are something will go wrong. People will remember the terms differently, they will claim there never was an agreement, or they will simply default on the terms of the agreement.
Operating agreements, partnership agreements, and by-laws need to be detailed and tailored to each company’s needs. Not having a detailed agreement that specifies how business will be conducted, how income will be allocated, how disputes will be resolved, and each member’s respective rights, responsibilities, and liabilities can result in disaster. It can result in the loss of the liability protection provided by the corporate structure, fighting amongst the members or partners, and unnecessary litigation.
Purchase agreements and vendor agreements are also important. Detailed agreements that specify the terms of each purchase or agreement for services will ensure that you get paid or you get the services that you paid for, and it will prevent unnecessary litigation.
What’s in a Name?
Even something as simple as choosing a name for your business can become a major decision that may determine the success or failure of your business. Companies that operate in the same state cannot have the same corporate name, and, if you choose a name that has already been taken or that is too similar to an existing company’s name, your application may be rejected. Even worse, if your proposed business name is trademarked by the U.S. Patent and Trademark Office, the Secretary of State may accept your application but you could later be sued by the trademark holder.
I Want My Business to Succeed…
Eight out of ten new businesses will fail within the first 18 months. 80%! We want your business to be successful, and our goal is to do all that we can from a legal perspective to ensure that you make it. Schedule a free consultation to discuss your new business by calling (843) 488-5000 or filling out our online form.