All new and existing business entities which conduct business within the State of Florida must register their business with the Florida Department of State. The owners of a new business that fails to register with the State may incur personal liability for business debts and obligations and may struggle getting a company bank account and using the State court systems. In order to remain in good standing with the State, all businesses which conduct business within the State must file an annual report between January 1st and May 1st of each year.
When building a brand and selecting a name it is very important to verify that your name doesn’t interfere with the intellectual property rights of a third party. If you select a name that violates the rights of a third party (because your business’ name is the same or very similar to another business), you may later be required to change your name and therefore rebrand your business, losing the good will you already built under the previous name. This can cause your business to incur significant expenses as related to rebranding and developing a new name and image.
Whatever business you are in, it is very important that your business has good contracts with its vendors, customers, and strategic partners. A good contract outlines the expectations of both parties, specifically identifying what each party will do, and when they are going to do it. When no written contract is used (or if there is not a good contract in place) it can be very difficult to enforce your business’ rights or defend your business against a claim because there is nothing clearly defining what each party has agreed to do.
If you own your business with other individuals or entities, having a partnership agreement (if your business is a partnership), an operating agreement (if your business is a limited liability company), or a shareholder agreement (if your business is a corporation) is essential. These agreements set forth the expectations for the business and its owners. If drafted properly, these agreements will identify the rules for how decisions will be made, how profits will be distributed, what will happen in the event of a dispute between the parties, the circumstances under which owners can transfer their business interests, and what will happen in the event of the death, disability, or divorce of one of the partners. Many otherwise complex disputes between partners that could otherwise cripple a business can be solved quickly and at the start by having a good agreement in place from the beginning.
From the moment your business hires its first employee, your business is an employer and must comply with certain employment laws. As your business grows in size the number of employment laws your business must comply with will also increase. The fines and penalties a business faces for violating employment laws are large and can cripple a business. As an example, only exempt employees as defined by the Fair Labor Standards Act are exempt from being paid overtime; if you make the mistake of believing that all employees who receive a salary are not entitled to overtime you may end up paying tens of thousands of dollars in fines.
One of the biggest reasons that individuals create a separate entity for their business is to shield themselves from personal liability for the activities and actions undertaken on behalf of the business. However, there is a process known as piercing the corporate veil wherein a creditor of the business can hold a shareholder, member, or partner personally liable for the acts of the business. One of the biggest factors courts will consider when determining whether to pierce the veil is whether separate business and personal accounts were maintained. All businesses should have a separate bank account and any business expenses which have to be paid should be paid from the funds in the business account. The owner should avoid the commingling of business funds with personal funds and the best way to do so is to have two separate accounts. When businesses use business funds to pay personal expenses piercing the corporate veil becomes much more likely.
As you start and grow your business it is very important that you address problems early on and prevent litigation whenever possible. Litigation is extremely costly and can cost your business thousands of dollars per month. These costs can cripple your business and stunt your growth. While at times litigation cannot be avoided many times it can. When your business is faced with a dispute, speak with an experienced attorney who can evaluate your options and help you resolve the dispute before your business ends up in litigation. Having solid contracts in place that address dispute resolution also goes a long way to mitigating your risk of costly litigation.
Most businesses are required to obtain some form of a business license. State and local governments have business license regulations that need to be examined to determine what your business must do in terms of obtaining and maintaining the required licenses. Failure to obtain required licenses can result in the imposition of fines. Depending on the type of business license required, the process and requirements for said business license will differ. It is important to not only understand what the process and requirements are for procuring the appropriate business license but it is also crucial that you ensure that this license is issued to your business prior to your commencing business operations.
One of the best ways to manage risk for your business is to purchase liability insurance. While in an ideal world your business will never be sued, the reality is that the longer your business is in existence the more likely you are to face circumstances that give rise to a legal claim being filed against your company. If you have adequately insured your business, your ability to deal with this type of liability risk will be greatly reduced. All it takes is one legal judgement awarded to a plaintiff who sued your business to stunt your business’s ability to grow and could even bankrupt your business if the judgment is large in nature. Further, many companies will not do business with you unless you have commercial insurance. Speaking to a commercial insurance agent can help you identify the type and amount of liability insurance your business needs. Don’t wait until you are faced with a claim to engage in risk management for your business.
Your business will be required to pay local, state, and federal taxes. If you operate in multiple states, you will have to comply with those state and local laws as well. Failure to do so can result in significant fines and penalties. It is very important to understand what taxes your business is subject to and to work closely with a CPA to ensure that these taxes are all paid on a timely basis. It is also very important that you develop a comprehensive accounting system from the start. Keeping track of the financial information related to your business is not easy but the ability to not only track this information but also access it via easily compiled financial reports, etc. will be crucial to your business’s overall success. The only way to do this is to ensure your business has a robust accounting process and system in place which can be either outsourced to a third party such as a CPA or bookkeeper or can be done in-house by using accounting software like QuickBooks.
This Blog was written by Hunter Business Law Attorney Sheryl Hunter. Profile