Business identity is a statement of your company’s unique innovation, service, and offering & distinguishes your business as the best choice for potential customers. It should be used to engage customers, create sales pitches, and inform marketing messaging.
Before you can open your doors for business, you must establish systems to protect your business identity. In other words, get your legal house in order to prevent yourself from business identity theft.
Once your legal house is in order, you’ll be well-positioned to build branded company assets (logos, websites, packaging, digital profiles like GMB, signage, etc) and start promoting and/or delivering the goods and services you intend.
Why is it Important to Legally Protect Your Brand Identity?
Branding is a combination of various elements such as your logo design, marketing materials, and visual elements. These precious assets can be protected from identity thieves by legally registering your business.
When starting a business(s), one of the last thing a business owner like you wants to deal with is the legal documents.
You want to be focusing on foundational business elements like your processes, delivering services and building your brand. Not something as tedious as deciding which legal structure to pick or identity theft protection. Far from facilitating the entrepreneurial mindset, the legal documentation and considerations are often boring, monotonous, and annoying for those people who are just trying to get their business identity off the ground.
Further, many see it as just another added expense to pay a lawyer when with certain new-age companies, you are able to do this all yourself.
In the age of Legal Zoom, it’s understandable that many entrepreneurs see this as one area where a little DIY can save them time and money. What’s more, who knows your business better than you?
The simple truth is oftentimes those small investments up front will go a long way to keep you out of financially draining legal headaches later in life!
Beyond the legal liabilities, setting up your business correctly can help you define and leverage business identity/brand and visual identity, by giving you the foundation needed to protect yourself from infringement from competitors. Or worse, protect you from a less than amicable Partner dissolution.
The following are some considerations for establishing your business’s identity that will allow you to put the legal concerns on the back burner while you focus on your growing business.
S-Corps, LLCs, DBAs, Oh My….
In today’s increasingly aggressive legal environment, it is important to file your business correctly so that you have a strong business foundation to protect your corporate identity. To build this foundation, there are numerous things to consider such as:
- Are you running the business alone (solo)?
- Do you have a business partner (or even multiple business partners)?
- Is your spouse or other family members, key stakeholders, in the business?
- What state(s) are you doing business?
- What state should you file when doing business across state lines?
And all of that comes before the most important question:
How do you limit your liability so if ‘something’ happens, you don’t lose everything?
Automated online services typically aren’t equipped to run through hypotheticals specific to your industry or business model. AI is good, but it’s not that good.
Nor are AI-based legal platforms typically structured to provide state-specific legal advice… and really, if the documents aren’t drawn up based on your state’s rules and regulations, then the documents may not provide the protection you expect (and need).
A qualified, state-licensed attorney will be able to explain the tax and legal implications of each business structure to guide you to the entity and structure for you and your business. They’ll be able to draft a solid operating agreement that will allow for the growth of your small business while still protecting everyone’s interests.
And, if something happens where you and a partner want to break from each other or your business is forced to close, that well-drafted operating agreement will precisely detail how to come to those ends.
Once you and your attorney have made the decision on which entity and structure works best for you, then you file your organizational papers.
While this may seem like a simple task, there are certain things that, if you choose to take this on yourself, can send it askew.
These potential pitfalls include filing only your federal paperwork and assuming you will have a state number generated automatically or selecting the same name as another corporation, LLC or LLP.
Further Reading: Accounting and Tax Basics: Choose Your Entity Wisely, Grasshopper
Experience Matters
An experienced attorney can walk you through this process and get you started on the right path so that your business is on solid footing from its formation. If you’re interested in learning more about the main four things you should know about LLCs in CT here.
Relatedly, your choice of entity will determine how you handle the issues most common to all business owners. We’ve written a brief summary of the main four issues we see quite often with our business clients – and why you, as a business owner, may care. Read more about those here.
Believe me when I say, the last thing you want is to receive a letter from the Connecticut Department of Revenue inquiring as to why you are doing business in the state without a Connecticut Tax ID number.
Another great way to establish your business’ identity and distinguish it from the get-go is a trade name (sometimes referred to as a DBA: Doing Business As). Trade names are easy to make and are a great way to identify your business differently from what the incorporated or LLC name is. After all, who wants to refer to their local restaurant as “Restaurant, LLC”?!
By using a trade name, you can give your business a simple title and keep the legal name out of sight. It creates a clear name for the public while allowing the business owner the protection of the desired entity’s structure.
Yet, once again, you need to be sure you are not using the same trade name as another business or not only could you be losing customers to them, you could also be setting yourself up for a legal claim against your business.
Staying on Top of Things
This is the step where so many business owners fall off. It is so easy to get caught up in your day-to-day life, trying to keep or grow your business while maintaining your personal life. Who really wants to take the time to file some paperwork with the state?
Failure to comply with these required filings could not only lead to issues with the state, but has the potential to open your business up to significant liability or impair your ability to sell your business or acquire a new one.
This is where your business attorney comes into play. Unlike the legal websites, your business attorney will be there for you to help file, or, your attorney can even file them for you.
One of the best tips for this is to make your business attorney your registered agent for your business. Not only will he or she get a yearly reminder regarding your filings, but should you run into any legal bumps or pitfalls, your attorney will be the first to know and will be able to go after the issue head-on.
Key Takeaway
It’s tempting to DIY the legal formation of your new business, but you likely lack either the experience or resources necessary to do so in a way that provides liability protection. And you can’t afford to take on the liability of legal mistakes.
Let us help you get started with your new business legally, professionally, and without any risk. Message me on LinkedIn if you have any questions or would like a consultation scheduled.
You may be surprised by how much more cost-effective it is than using Legal Zoom or other online services. And if not, then at least there’s no harm done!
Message me on LinkedIn if you want help with forming your company today!
Read more about the Author, Justin Krajeski, here.
