If you're asking, the answer is probably "yes." Operating as a sole proprietorship may simplify some aspects of your business, but formalizing your business by creating an entity offers important advantages. Most important? Liability protection. As a sole proprietor, you're on the hook if you can't perform an obligation under your lease or contract. Participating in an event and someone gets seriously injured after tripping over your display? You can be sued in your personal capacity. For most sole proprietors, setting up an LLC is a quick, easy process that is well worth the expense.
It depends on several factors including, the types of goods or services your business provides, who you're in business with, and how you want to distribute profits and losses. Each entity carries different costs and benefits, though many of our clients opt for limited liability companies. The options include:
- Corporation (business corporation, service corporation, statutory close corporation, investment company);
- B corporation;
- Limited liability company (LLC);
- Limited liability partnership;
- Limited partnership;
- Cooperative association;
- B Corporation; and
- Non-stock corporation.
We can help identify which option is best for your business.
Wisconsin statutes require business to keep certain records. Operating a business corporation? Check Wis. Stat. § 180.1601. A limited liability company? Look to Wis. Stat. § 183.0405. In addition to records required by statute, we encourage clients to document and approve any big structural or financial changes in writing, including signing a new less, taking out a new loan, or appointing a new officer. In addition, all Wisconsin entities must file an annual report with the Wisconsin Department of Financial Institutions.
Individuals starting brand new businesses often ask how they should pay themselves as the owner of the business (e.g., do I pay myself a salary or take money from the business through an owner’s draw?). Most business owners determine their means of compensation in consultation with their accountant, keeping in mind both the entity’s legal requirements for compensation as well as Internal Revenue Service regulations.
The big three contracts for entrepreneurs getting businesses off the ground are:
- Operating agreement (especially if multiple people own the business) defining how you and your partners will run the business;
- Terms of service for your customers defining expectations and obligations; and
- Agreements with your team (at-will employment offer letters, independent contractor agreements, and/or employment agreements—depending on whether you’ll have employees and if so, what you’ll promise them).
A trademark is a word, phrase, design, or symbol that identifies the source of certain goods or services (e.g., Coca-Cola, Apple, and Nike). Trademark rights stem from use of a mark not registration with the U.S. Patent and Trademark Office. But registration includes some significant advantages, see Trademark Registration and Disputes.
Copyrights protect original artistic works in a fixed form (e.g., including photos, books, movies, songs, paintings, articles, and software code). Copyright owners have the exclusive right to reproduce and profit from their underlying work. But copyrights don’t protect an idea, they protect the expression of an idea.
To begin, we review your mark (either a word, phrase, or logo). Sometimes, small businesses pick names that, while perfect for their business, are not likely to obtain trademark registration. For example, Ruth’s Bike Shop will not meet the requirements to obtain a federally registered trademark because it’s too descriptive (unless Ruth’s Bike Shop becomes a nationwide business with a multi-million dollar annual marketing budget). If the phrase or logo is distinctive enough, we procure a search report and analyze whether any active registrations could hinder your ability to register. This analysis includes identifying what your goods and services are as well as comparing your mark to others’.
If our search and analysis return encouraging results, we then begin to prepare your application, working with you to refine your description of goods and/or services and other application components. Then, we file the application and wait, usually for at least three months, for the USPTO trademark examiner to review the application and either (a) approve the trademark for publication in the Official Gazette or (b) issue an Office Action detailing the examiner’s objection(s) to the application.
Objections come in several varieties, ranging from quick cosmetic fixes to substantive disputes requiring legal analysis. Where possible, we use legal research and analysis of trademark filings to address the trademark examiner’s concerns and move the application to the approval phase. Once approved for publication, the mark is published for a period of 30 days, during which any third party who believes their mark (either registered or not) would be negatively affected by your registration can object. If the publication period passes without objection, you’ll receive a trademark registration certificate and can begin using the ® to denote your ownership of a federally registered trademark.
According to the USPTO, the quickest timeline gets your trademark registered in seven (7) months. In our experience, however, the process can take more than a year, especially when we need to respond to inquiries from the USPTO trademark examining attorney.
Get your entire agreement in writing. More importantly, make sure that the contract you sign actually says everything you expect it to. If your landlord promises to make a specific improvement before you move in, that promise should be reflected in your lease agreement. Promises made outside of a contractual agreement can sometimes be enforceable, but the process to enforce the promise is neither inexpensive nor easy. The quicker, cheaper route is to make sure the contract addresses every issue at the outset before signing.
If a person or entity determines that it has a legal claim against you, it can file a lawsuit against you. Lawsuits may be filed in different state or federal courts, depending on what the claim is, where it arose, and where the parties (the plaintiff who filed the suit and the defendant against whom damages or other remedy is sought) live. A party initiates a lawsuit by filing a complaint listing the facts and legal basis supporting the claim.
To be sued, you must be served with the complaint, according to the rules in the jurisdiction where the case was filed. The most common method of service is for a person (a process server) to personally hand you documents at your residence or place of business. If you receive a complaint, even if you think the claim has no merit (issues which we can address), contact a lawyer immediately because a response is required and firm deadlines limits apply.