May 20, 2023 -Transitioning your side hustle to a full-fledged business is a daunting, but exciting time for any entrepreneur. It’s a landmark moment where you push all your figurative chips in. The transition to a business comes with certain legal requirements that you have to be on top of.
Here are some legal considerations for anyone starting a small business in the United States.
Protect Intellectual Property (IP)
Your branding, name and logo are all the lifeblood of your business. As soon as possible, look into copyrights, patents, and trademarks. It’s easier now than ever to fall victim to copycats or business impersonation, especially if your business is online. IP protection laws exist on a national and state level.
Establish Written Employment Policies
Employees are the backbone of any business, but if your business has any proprietary techniques that are trade secrets, certain policies need to be enacted to protect these techniques during inevitable employee turnover. To combat this, you should look into implementing Non-Disclosure Agreements (NDAs) and Non-Competition Policies.
Registering under the Correct Entity Structure
The legal entity structure that your business falls under will determine many aspects of not only its day-to-day existence, but also how the business is taxed and what business loans can be procured. Take time to review the different types of business structures, such as Sole Proprietorship, LLC, Corporations, Partnerships and Nonprofits, to decide what works best for you.
In an increasingly digital world, the privacy of your customers and employees’ data is incredibly important. It’s crucial to be upfront about what data you’re recording, and outline the privacy policies in place to protect that data.
Sensitive information such as email addresses, home addresses, demographics, logins, etc. need to be protected. If you’re in the business of selling customer information to other companies (for advertisement purposes, etc.) then you also need to be upfront about that, usually in a terms and conditions statement that the customer will be required to sign off on.
Business Banking Accounts
Having a separate account with business finances distinct from your own is important not just for keeping track of expenses and revenue, but also decreases the risk of personal liability if an audit were to occur.
Consult a professional
Business law is complicated and, on the surface, unapproachable. To prevent mistakes or run-ins with the law, a consulting professional will guide you on the right path preventing potentially costly mistakes.