- If operating as a sole proprietor or partnership, you will be personally responsible for business debts & judgments.
- The cost of forming a business very small – as little as $125 set up fee, $200 per year to the Secretary of State, plus a little more for accounting each year depending on the business.
2. Every business needs insurance.
- Find a good broker who can analyze what your needs are and get the appropriate Commercial General Liability policy (CGL). The Insurance company will pay attorney’s fees if sued and pay for a judgment against the business, up to the policy limits, if covered.
- Insurance to cover business losses (accidents, theft)
3. Every business needs a good CPA.
- When making business formation and organization decisions, attorneys consult with clients on the liability side. However, attorneys are not accountants – you should discuss tax issues with an accountant.
- On the other hand, accountants are not attorneys – their advice should be limited to tax or spotting potential legal issues and referring you to an attorney.
4. If more than one owner, your business needs an operating agreement.
- Defines roles, limits of power, profit sharing, percentage ownership
- Even if roles, power, profits, and ownership is split evenly, and everyone gets along great, operating agreements are important to govern when one partner wants to sell or leave. We have discussed buy/sell agreements and incorporating this language into operating agreements in a prior blog.
5. A bad contract is worse than no contract at all.
- Do-it-yourself, inexpensive online forms will get you in trouble.
- We have had many clients bring us contracts or forms obtained online with provisions that are not valid in North Carolina, even though the company they were purchased through said they were North Carolina forms.
- Even if the contract/form is valid, it is probably not the best. Attorneys know good stuff to put in contracts to protect you. We see this a lot with leases and attorney’s fees provisions.
- If something important is left out of the contract, a court will assume the parties did not intend for it to be part of the agreement and will not enforce it.