When a person decides to start a business, it’s normal to focus on the practical aspects: creating a business plan, improving the manufacturing process, establishing good distribution channels, marketing, finding a suitable office, and so on. But the legal aspects of the business are often forgotten, or set aside, until “everything else is settled”. This is a huge mistake, and one that small business owners, solopreneurs and solo practitioners must be very aware of. The consequences of not taking care of the legalities of your business can send your company to the curbside, or at least put major blocks on your way to entrepreneurial success.
However, instead of focusing on the negative repercussions of not taking care of legal matters, here are six reasons to show that registering your business is the smartest thing to do.
It shows professionalism
Legalizing your business shows your clients and potential investors that you’re serious about your business venture, and that you’re in it for the long haul. Also, all other things being equal, it’s easier for a legally established business to gain clients and grow than it is for an individual.
It gives you access to financing sources
When your business is properly established and legal documents are in place, you have the option to apply for loans or finding investors to increase your operation, giving you the opportunity to grow or expand your business. Not being able to get the funds you need at the moment you need them can be extremely detrimental, or even fatal, to your business.
It helps you protect your intellectual property
Paying attention to legal and making sure your intellectual property is registered can be a determining factor in the event of a dispute. For example, in some cases you can’t take action against someone who is using your trademark or has stolen your copyrighted material unless you have had them properly registered. And, they must be registered in the correct categories in order to succeed once you take action.
It allows you to get the necessary licenses and permits
Many businesses require a license that entitles them to operate. Often, you need to have a license issued by the city or country in which you keep premises, as well as any other place where you execute your business. For certain types of businesses and professions, such as hotels, restaurants, health services, law firms, and so on, it is necessary to have a special permit or license issued by the local government, the state medical board, or bar association, etc. To obtain these permits and licenses, you must be registered with the secretary of state, whether as a sole proprietor, a limited liability company, a partnership, or a corporation.
It helps you protect your finances and assets
One of the most important aspects emphasized by financial and legal advisors alike is to keep your personal finances separate from your business finances. Regardless of the size of your company, operating as a properly formed and documented business entity and having a separate business bank account helps protect your personal savings and assets in case your business ends up being unsuccessful, or in the event of litigation.
It helps you grow your company smoothly
Having a business entity that is properly set up and documented, having a website that is legally compliant, having your master contracts in place and having your intellectual property registered are just a few of the steps that can help pave the way to smooth operations and smooth growth. It allows you to easily onboard new team members and to focus on your business rather than be sidetracked by complicated, annoying and extraordinarily expensive legal issues.
Most people don’t give the legal aspects of starting and growing a business their due importance—not because of negligence. Sometimes, setting up a business is stressful and complicated enough, and the idea of having to prepare legal paperwork and forms is overwhelming. Others just don’t know how to even start the process, or where to get information. In such instances, a trusted business advisor may be just the person you need to provide legal advice that actually helps and allows you to do what you do best, growing your business.
In any case, do yourself a favor and legalize your business. Your future self will thank you for it.