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Because we’re kicking off a new year, but still very much all about the joy of giving, allow us to unveil our first-ever (and first of many) business blog! We know, we know – we have a tough act to follow after the launch of our employment law blog, but we’ll try.
Although we’re embarking on our maiden voyage into business blog territory, these issues aren’t new to us. At Weinstein + Klein, we’re not just employment law attorneys – a big part of our practice also focuses on all aspects of business law: startups and formation, partnerships, contract management, equity offers, mergers and acquisitions, corporate governance, commercial leases, you name it.
And what better place to begin than the very beginning? In this flagship edition we will discuss key issues you should consider when forming your very own business and setting up its foundation: name, entity type, registering the company, corporate governance considerations, contracts, and hiring. Consider this the “What to Expect When You’re Expecting” of business formation. But first, a little bit about our authors and corporate governance gurus: Damien Weinstein and Laura Garcia.
Allow Us to Re-Introduce Ourselves
Damien heads the firm’s business and transactional work. With a background in litigation, he knows how contracts can “go wrong”. Along with his colleague Laura, Weinstein + Klein’s business services cover all the corporate, business, and transactional work that fit our clients’ needs. In the past year, our firm has helped clients do some incredible things: buying a business; selling a business; bringing on partners; buying out partners; securing outside investments; signing commercial leases; launching new startups; expanding into foreign territories; drafting day-to-day contracts; buttoning up corporate formalities and resolutions; hiring subcontractors; and everything in between.
But enough about us, let’s get into it. First up, your business name (spoiler alert – easier said than done, but don’t overthink it).
What’s in a Name?
There’s no book of baby names for businesses (although that would be a fun read), and ChatGPT may be able to give you some ideas, but at the end of the day you need to make sure your name is available. Like we said, easier said than done . . . trust us. If your plan is to use a generic business name but then file a d/b/a or trade name, that may not be the simplest solution, because even d/b/a’s are subject to availability requirements. Further, certain jurisdictions have additional county-specific requirements for d/b/a’s which can easily become a procedural headache and add up cost-wise. If you’re curious what words cannot be included in your business’s name, let us know and we’ll tell ya.
Point is – be 100% sure that your business name is available. Run name availability searches in the state you’re operating in (and any other state you’ll be doing business in) and consider a complete trademark and internet search. This will help determine what businesses are out there with identical or similar enough names to yours, and more information you’ll need to determine if you can feasibly operate your business under that name. For example, how good is a business name if the domain is already taken? And pay special attention to the trademark clearance – nothing kills a new business launch like a cease and desist letter right after formation . . .
What’s Your Type?
Another issue to consider when starting your company is which entity type to choose. Whether it’s a partnership (hint: it’s probably not), C-corporation, S-corporation (or as we like to call it, a C-corporation with special tax treatment), or a limited liability company (“LLC”), each entity type has different tax, corporate governance, and administrative implications. For example, if your plan is to take on investors and issue shares, you may prefer to register as a corporation. If that’s not the plan, LLCs provide similar levels of asset and liability protection coupled with flexible tax treatment options and less administrative hurdles. Takeaway: LLCs work best for most people and they’re the easiest to work with . . . unless you’re the next Silicon Valley unicorn. There’s a reason why business owners and lawyers love LLCs.
There are pros and cons to each entity type, which is why it’s critical that you don’t go into this blind. Consider your long-term goals for your business, potential growth, and overall risk tolerance to make an informed decision that aligns with your corporate vision. And, of course, make sure you consult with professionals who can steer you in the right direction. For example, your entity selection certainly has tax consequences – so team up with a great CPA to help guide you.
Let’s Make It Official – The Launch
Once you’ve made your choice, go ahead and register your entity with the state. Most businesses register either in the home state in which they plan to operate, or in Delaware (due to Delaware’s favorable business laws). For most people, the state where they operate is the best choice. Delaware ain’t for everyone.
Depending on the state in which you register, however, there may be additional registration requirements and liabilities that you didn’t anticipate, so approach this the same way you would with your name and entity type – with careful thought and planning. And now . . . the fun begins.
A Word on Partners . . .
We’re sure you’ve heard the words “get it in writing” more times than you can count, and that’s going to be the case from Day 1 when dealing with partners. If there’s more than one of you, get your partnership terms in writing: a partnership agreement (if you’re a partnership), an operating agreement (if you’re an LLC), or by-laws/shareholder agreement (if you’re a corporation). These documents are critical, as they serve as the foundational framework and roadmap governing the organizational structure of the company, profit distribution, voting rights, liability protection, and more. Having these agreements in place not only clarifies expectations but also helps prevent misunderstandings, conflicts, and potential legal disputes down the road. In other words, if your company is a marriage, these are your prenups. Just don’t set it and forget it – as the business grows in size and partners, make sure to update these accordingly!
Get it in Writing (Again)
If TLDR crossed your mind through any of this, there’s one thing that we want to reiterate here: GET. IT. IN. WRITING. Signed your first client? Congratulations! Now, get it in writing with a client services agreement or master services agreement. Want to protect your company’s intellectual property and confidential information? Smart thinking, but get it in writing with a non-disclosure agreement or proprietary information and inventions agreement. Thinking of hiring an independent contractor? Happy for you, but make sure you have an ironclad independent contractor agreement (and that they’re actually not just misclassified employees, *ahem* have you been reading our employment law blog?).
The long and short of it is this: contracts serve two key purposes. First, they define the relationship and expectations of the parties. Second, they shift risk and liability between the parties. A well drafted agreement is fundamental. We would be remiss if we didn’t also mention that having contracts, resolutions, and other written documentation further legitimizes your business and further insulates you from individual liability. You wouldn’t want someone to come around and say your business is a front or a sham simply because you couldn’t be bothered with corporate formalities.
Some key terms we suggest focusing on: payment (timing, frequency, etc.); scope of work; limitation of liability; indemnification; intellectual property; insurance requirements; termination; dispute resolution; and confidentiality. These are the essential terms of any solid contract.
Now to come full circle: hiring employees. If you haven’t been following our employment law newsletter, you definitely should (shameless plug). Stay up-to-date on best practices and employment law updates, and most importantly, make sure you’re compliant (“also tell them it’s really funny and incredibly well-written” – Brian). The last thing you want is to take the time away that you could be spending growing your business to deal with an employment lawsuit.
As this blog takes its first steps, you’re closer to welcoming your new business to the world! In each edition, we’ll continue to follow the journey of a business’s launch and growth. Stay tuned for our next blog where we discuss formation documents such as operating agreements, partnership agreements, by-laws, and shareholder agreements.
If you’re not sure about where to start with your business – start here, with us, because as always, if you’ve got questions, you know we’ve got answers.
~ The W + K Team
ABOUT WEINSTEIN + KLEIN P.C.
Established in 2019, Weinstein + Klein is a boutique law firm focused on labor and employment law, business matters, and litigation. W + K works with businesses, individuals, and entrepreneurs to protect their legal interests. In addition to advising clients on employment matters and working with businesses to minimize their risk of litigation, we advise small businesses and start-ups on various business law matters.