In March 2010, unemployment in Florida hit 12.3 percent. This dismal rate, the highest since records have been kept starting in 1970, has many displaced workers and discouraged job seekers looking at self-employment options. People across the job spectrum are leveraging their layoffs as opportunities to start new businesses or buy into established franchises. While the economic downturn poses additional challenges to these already risky ventures, savvy business owners can take steps to minimize their risks.
Legal Issues to Consider
Starting a small business requires a lot of research and preparation. Even small, home-based businesses need to be sure they are complying with the law. Business owners should be aware of local, state and federal laws that may apply to their company.
Different business structures carry different reporting and tax consequences and varying degrees of insulation from personal liability. Common forms of business organization include:
- Corporation: A corporation offers shareholders the potential to share in dividends while restricting liability to the amount of their original investment. Corporations have formal recordkeeping requirements and tax considerations
- Limited liability company: Members of a limited liability company (LLC) are treated similarly to shareholders of a corporation, in that their liability extends only to the amount of their investments; however, income and losses are generally attributed to the managers, which is more like a partnership
- Sole proprietorship: A sole proprietor may file a business name registration or fictitious name certificate which enables them to transact business lawfully but the personal assets of the sole proprietor are not shielded from business liabilities
Protection of Intellectual Property
Protecting a company's name and marks is becoming increasingly important with the rise of cyber-business. After working to establish a solid client base and reputation, business owners need to protect their reputation and prevent other companies from profiting by creating brand confusion.
A trademark is a registered name or symbol used in commerce and subject to regulation by the state or federal government. Florida trademarks may be registered for 10 years and protect a business' name or symbols within the state, but only to the extent that the mark does not conflict with and is not superseded by a federally registered trademark.
Statutes and regulations vary by industry but some requirements common to small business are:
- Business license: Local government frequently requires a business license and fee for companies to operate legally
- Certificate of occupancy: A certificate of occupancy is a written certification that the building may be occupied; in addition, a certificate of completion may be required for some alterations and remodeling to buildings
- Taxes: Employers must withhold tax from employees, pay Social Security tax, and may be required to obtain a federal tax identification number or state sales tax number
- Insurance: Entrepreneurs may want to consider insuring the business, property or even its owners or key employees
- Occupational Safety and Health Administration: Employers must follow the health and safety standards set forth by OSHA and any state equivalents
Business Startup Resources
According to author and professor Rob Fairlie, novice business owners who stay in their field are up to 40 percent more likely to survive than those entering an unknown field. In addition to personal experience, there are other resources available.
Small Business Administration
To thrive, businesses must be properly capitalized. In addition to personal savings, banks and investors, the Small Business Administration (SBA) offers financing options for small businesses. The SBA can guarantee loans, making funding available to small businesses on more reasonable terms. The SBA also regulates the Small Business Investment Company, which makes capital available to small businesses as loans or investments. The association also provides government contracting assistance in order to level the field for small businesses to win federal contracts, and can guarantee bid, performance and payment bonds for eligible contractors.
Traditionally underserved segments of the small business community may also be eligible through the Pre-Qualification Pilot Loan Program to receive substantive support in assembling viable loan applications.
Small Business Development Center
The SBA provides partial funding for each state Small Business Development Center (SBDC). The SBDC offers services such as business education, management development, technical information and marketing assistance on a one on one basis or as regularly scheduled seminars.
Sponsored by the SBA, SCORE is a member volunteer association, comprised of experts in diverse areas of business management who counsel present and prospective small business owners. Individual and team SCORE counseling is provided free of charge and there may be a nominal charge for training workshops and seminars. Any small business can obtain confidential and personal help from SCORE, whether or not the business has applied for or has an outstanding SBA loan.
Reach Out to Hassell + Snell PLLC
In addition, a lawyer can counsel clients regarding business organization, draft clear organizational or incorporation documents, and help clients minimize their liability. Those interested in starting a business should contact an attorney to discuss their plans and determine their options.