Becoming an entrepreneur is an exciting endeavor…but being your own boss often requires that you wear many different hats and take responsibility for all of the details involved with operating a business. After you’ve evaluated your business idea and researched the market, and while you’re in the process of creating your business plan and determining startup costs and other essentials to get your business up and running, here are some legal considerations to keep in mind…
1. Hire Professionals.
Attorneys, accountants and other professionals are invaluable resources for a new business owner, as they can help you navigate through the many details and requirements necessary to start and run your business, including those mentioned below. Seek referrals from friends, family, and other business owners. You may want to find professionals who are familiar with your particular industry and/or working with new businesses. Having good professionals on your business team (especially in the beginning) can be one of the best investments you’ll ever make in your business, and, hopefully, you will develop relationships with these advisors that will last for the life of the business (and beyond). It is often much less expensive to hire a professional to do something right the first time than it is to hire a professional to fix a problem after-the-fact. Although a great deal of information, “forms” and resources are available online and can be helpful for educational purposes, relying on the internet to be your lawyer will likely come back to haunt you at some point.
2. Name Your Business (or Product).
Deciding on the name of your business is one of the most important – and sometimes most difficult – aspects of starting a new business. Not only will you want to make sure the name is appealing to customers, but you’ll also want to make sure the name isn’t already being used by a third party providing identical or similar products or services. Before using or registering a business name, you should at least perform a quick “knockout” availability search: (a) check for entity names and state trademark registrations with Secretary of State Offices where business will be done; (b) search the federal U.S. Patent and Trademark Office (USPTO) trademark database; and (c) perform a Google search to determine whether any third party has common law rights to the name. If you are in a regulated profession or industry, there may be restrictions of what you can and cannot include in your business name. You’ll also want to make sure the domain name is available for your business name.
Once you decide on a name (and type of entity) and are comfortable that it’s available to use, you’ll need to register your name with your Secretary of State’s Office and potentially with your County Clerk’s Office as well.
Please note that registration of a business name with one or more Secretary of State offices does not guarantee that you have exclusive rights to use that name and/or are not infringing another party’s mark. The Secretary of State does not allow registration of identical business names in its state (mostly to avoid internal confusion). However, multiple entities can register identical fictitious, assumed or doing business as (d/b/a) names in the same state. [For example, if XYZ Company, LLC is already registered with the Texas Secretary of State, another company could register ZYX Products, LLC and then register a fictitious name for XYZ Company…so it would be ZYX Products, LLC, d/b/a XYZ Company.]
Trademarks or service marks, on the other hand, can be used by multiple entities at the same time, so long as they are not used in connection with the same or similar goods or services and customers are not likely to be confused as to whether the goods or services are provided by the same entity. If your entity is also using its business name as a trademark or service mark in connection with its products or services, then it is advisable to have your legal counsel perform a trademark search to be as certain as possible that no other individual or entity is also using the mark for similar goods or services. Depending on the results of the search, filing a trademark application with the USPTO to obtain a federal trademark registration for the mark (and/or logo) may be advisable.
Click here for more information about selecting and protecting names and marks.
In Part 2, we’ll discuss legal entities, financing your venture, and related matters.