6 Important Things You Need To Know When Starting A Business
Updated: Jul 29, 2022
As business owners, new and seasoned, we like to believe we have all of our business practices in place. However, there may be simple things that have been overlooked that you don't even know you should be concerned with.
Becoming a business owner is a serious commitment. It's more than just taking your side hustle and getting a business license and now calling yourself a business owner. You now become liable for many things, and if you are not prepared with the correct information, you can lose everything; your business, house, car, or your children's college fund. Any assets that you have, you could lose.
During my discussion with a small business attorney Courtney English, we discussed and broke down 6 important things you need to know when starting a business.
These 6 topics are often misunderstood and overlooked. As small business owners ourselves, we want to share these important topics so that you can protect yourself and your business.
We chose topics that we get the most questions about, broke them down, and shared tips about how you can protect yourself and your business.
It's so important to be proactive instead of reactive when it comes to your business.
Here are the topics we discussed:
Do you use a contract when working with clients?
We find that many businesses work without contracts. This is a scary practice for any business owner, large or small, new or established.
Don't think that your business is never at risk for any type of liability.
Top 5 Things You Should Always Have In a Contract:
How long are you in the contract?
How will you renew?
Do you want to renew?
💡 Tip: Terms can also be a great business tool. It's a great way to start a conversation if you wish to continue working with your client when you need to renew a contract.
📍 Question: What if you did not put an end date in your contract, and the client wants more time than you discussed?
📌Answer: The courts would look at the industry standard for the amount of time the work generally takes and that time frame would reside.
2. Termination and Cancellation:
What happens when you no longer want to work with your client or partner(s)?
What if things don't work out? Will you refund the funds that have already been used?
You don't want the courts to decide this for you!
You need to set boundaries; this is the perfect place to do just that. In your contract, you would include the language to protect how you want the situation handled.
If you are working with a partner, how do you resolve the work you are doing together?
Have you set a time frame and certain work obligations that need to be completed before you can terminate the agreement?
If your client is not happy with your work, will they still provide you a certain amount of money for the work you did and any materials you supplied?
It's extremely important to be clear in your contract so that both parties understand what they will receive from working together.
3. Dispute Resolution:
Dispute resolution can protect you from going to court and having the courts decide how to handle the situation.
For instance, you can add a 30-day clause that allows you to try to remedy the situation so you don't have to go to court and incur expensive court and attorney fees.
Clients cannot ignore this clause. If the client decided they don't want to try to resolve the issue with you and allow you to remedy the situation and the client takes you to court, this clause would be in your favor, and the client would have to allow you the 30 days to fix the issue.
4. Governing Law:
What state law is going to govern?
This is the law that is going to govern based on the state law that is written in your contract.
For instance, my business is in IL, and I have contracted with a company in Washington. So that the law is unbiased and fair for both parties, we may pick another state; for instance, Texas could be written into the contract, and the laws of Texas would preside so that it's the same for both parties versus IL where my business is located.
🎯 Always have an attorney help you with this!
5. Entire (Integrated) Agreement Clause:
Everything in the contract is what sticks and is binding.
Conversations you may have had via email or text that were not written into the contract, the business cannot be held accountable for those agreements.
🎯 Example: Let's say you had an email exchange regarding a discount for a product you were purchasing. In the meantime, you signed the contract, not realizing that the discount was not in the contract. Now the invoice comes, and you are billed for the full amount. The business does not have to honor the discount because it was not in the contract. The price in the contract stands firm. Everything in the contract sums up the agreement.
🛑 MAKE SURE YOU READ THE ENTIRE CONTRACT AND ASK QUESTIONS BEFORE YOU SIGN IT!
Be careful who you go to when having a contract written. You want to make sure the information you receive is accurate and pertains to your business situation.
Ready-made contracts may be handy, but most times, the contracts are not complete and accurate or specific to your business needs and could cause you liability.
Remember, the goal is to prevent issues from happening.
Are you ready to register your business? Learn the steps you need to when starting your own business. Download your free ebook today!
When you go from a side hustle to a business that is making money, you need to decide on what type of business entity you want to establish.
How do you determine what business license is right for you?
You need to first think about what the future of your business looks like.
Here are some questions to ask yourself before you decide on what type of business structure you want to register for. You want long-term protection for your business even when you're not here.
📍 How many employees?
📍 Are you making products?
📍 Is your company international?
📍 Will you have partners or investors?