Starting a Business? Here are 8 Most Important First Steps

Starting a new business can be an exhilarating journey, but it's also comes with some complex challenges. In order to ensure your new venture starts off on a solid course, it is important to know where to start. In this post, the experienced business attorneys at Thompson Legal will break down the key first steps to consider when starting a business, helping you establish a solid foundation for your dream company.

Please note that this post is not exhaustive, and every situation is unique. In the event that you have questions about your business, it’s advisable to speak with a legal professional. Contact Thompson Legal to schedule a discovery call with a Michigan business attorney.

1. Choose the Right Business Structure

One of the first decisions you'll need to make is choosing the right legal structure for your business. The structure you select will have a profound impact on your company's legal obligations, tax implications, and personal liability. Common business structures include: 

• Sole Proprietorship: The simplest form of business, where you and your business are considered one and the same. You have complete control but are personally liable for business debts. This is generally the most advantageous for small business who don’t make considerable taxable income and want those loses to flow directly to the individual owner. 

• Partnership: If you're going into business with others, this structure allows shared responsibility and profits, but also shared liabilities. This is the simplest ownership structure available to businesses owned by multiple parties.

• LLC: A limited liability company (LLC) combines the limited liability benefits of a corporation with the simplicity and flexibility of a partnership. Owners (members) are typically not personally liable for business debts.

• S Corporation: An S Corporation is a special designation to small companies which allows LLCs to be taxed as corporations. This permits you to pay yourself an annual salary, and taking any remaining bonus as a end of year tax reduced disbursement. 

• Corporation: Provides a separate legal entity from its owners (shareholders), offering strong liability protection but with more formal requirements. This structure is sought after for those seeking to sell shares of their company to investors. 

2. Register Your Business

Once you have chosen the right business structure, you will need to register your business with the state. This typically involves selecting a business name. The first step should be searching your state’s business entity registry (Michigan’s can be found here - Corporations Division - Search for a business entity (state.mi.us)). Once a unique name has been chosen, you’ll need to complete the appropriate Articles of Organization with the State of Michigan here.

3. Secure Financing

To get your business off the ground, you may need financing. Whether you are using personal savings, seeking investors, or applying for loans, it's crucial to have a solid business plan in place. A well-crafted business plan not only helps you secure funding but also serves as a roadmap for your business's growth and success. New business owners should also consider applying for available grants and resources provided by the Small Business Association and State of Michigan.

4. Tax IDs and Bank Accounts

Once your entity is formed, you will need to pull an Employer Identified Number from the IRS online or through an SS-4 application. Once received, you can open your business operating, checking, and savings accounts. If applicable, consider applying for and any sales, use, or income tax withholding with your state as well.

5. Protect Your Intellectual Property

Your business's intellectual property, including trademarks, copyrights, and patents, can be invaluable assets. Michigan has their own protections for Trademarks, Service Marks and Insignia (Trademarks, Service Marks and Insignia (michigan.gov)) as well as the USPTO (United States Patent and Trademark Office (uspto.gov)). Protecting them early on can prevent costly legal battles later. Consult with an intellectual property attorney to assess your IP needs and take the necessary steps to secure your rights.

6. Get in Compliance

Ensure you protect your business properly by obtaining the necessary licenses and permits. If you plan to hire employees, you must adhere to federal and state employment laws. These regulations cover various aspects of employment, such as minimum wage, overtime, workplace safety, and anti-discrimination laws. Hiring of additional employees and independent contractors also may require certain withholding and tax requirements. Complying with these laws is essential to avoid legal trouble and maintain a positive workplace culture.

7. Create Contracts and Agreements

Whether it's a lease agreement for your office space, contracts with suppliers, or employment agreements, having well-drafted contracts in place can help prevent disputes and protect your interests. Starting with clear and effective contract agreements ensures all parties have a clear roadmap of their working relationship as well as shields you from future liability.

8. Obtain Insurance

Insurance is a critical aspect of risk management for any business. Depending on your industry and specific circumstances, you may need various types of insurance, such as liability insurance, property insurance, and workers' compensation insurance. Proper insurance coverage can shield your business from unexpected financial burdens.

Conclusion

Starting a business is exciting but it is essential to understand the legal aspects involved. Remember that each business is unique, so tailoring your legal approach to provide protection and flexibility for your specific circumstances is crucial for long-term success. Seek guidance from legal professionals when needed to ensure you're on the right legal path to entrepreneurship. If have questions about your new business, contact Thompson Legal to schedule a discovery call with an experienced Michigan business lattorney. 

This blog is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a business lawyer about your case Contact Us at (734) 743-1646 to schedule a consultation.