For people who dream of being their own boss, few things are more exciting than starting a business on their own. If you have a solid business plan, your startup company should earn profits in a reasonable period of time. Before you take the first steps though, you should make sure that you avoid these common startup mistakes. The tiny legalities and paperwork you have to go through should not be ignored and the below examples can get you on the right path.
A Clear Written Agreement
There should be a clear and written agreement with the co-founders, if there are any. If there is not a clear agreement, there could be huge problems in the future. The written agreement should outline each person’s salary and percentage of ownership. The agreement should also clearly indicate the roles and responsibilities of each person or role you have to fill.
Start a Corporation or a Limited Liability Company
New business owners have to make several decisions. Some entrepreneurs do not start their companies as a limited liability company. An LLC is a limited partnership and a corporation. It has more tax benefits than C corporations. Many companies have to deal with higher taxes or significant liabilities. In this case, it might be wise to consider your options.
Create Standard Contracts
Every startup should have standard contracts for services rendered. The contracts can be tailored to make the terms more favorable to the customer. Make sure that the contracts convey the terms in a concise manner. The contracts should include payment information, liabilities, and limitations. You can hire a third party or an attorney to help with the specifics and wording of these contracts to make them more official.
Get the Proper Documentation
Startups need to have proper employment documentation. If the startup has formed a corporation, the company needs to have a Stock Incentive Plan and an Option Grant. The company will also need an employee handbook.
Protect Your Products and Services
If the startup has a unique service, the owners should consider filing intellectual property paperwork. If the paperwork is not filed, a competitor can steal the idea. The startup should obtain a patent, and the owner should copyright the original work. The company should also use a trademark. A registered trademark will protect the symbolic value.
Set Aside Money for Taxes
Consider important tax issues. All products should be taxed. The company will have to pay sales taxes and payroll taxes. Some companies may be eligible for various tax incentives.
Thousands of new companies are started every year, and 50 percent of new companies are successful after five years. A successful company is more than a game of chance. Successful business owners are pragmatic and determined to succeed.