Every business owner dreams of growth. You naturally want to see your client list swell, your revenues climb, and your reputation grow. But while business expansion can certainly be exciting, it can sometimes be a little daunting, too.
For instance, expanding your business requires you to think carefully about potential legal pitfalls, to say nothing of the ever-shifting regulatory environment. For entrepreneurs who are planning a serious business expansion, consider a few major legal issues.
First and foremost, there’s the question of how you’ll structure the company.
When you first start generating income on the basis of self-employed activity, you’ll typically default to Sole Proprietor status. When running your business as a Sole Proprietorship, it just means that you get to make all the decisions yourself. You alone receive all the revenues, and you alone are responsible for any business liabilities.
As you grow your business, you may wish to opt into a different legal structure, specifically one that will offer you some protections against potential lawsuits. Unless you want to pursue full-on incorporation, the best option is to register your business as an LLC.
Registering your business as an LLC establishes it as its own distinct legal entity, meaning you can keep your personal affairs safe and separate from your business ones. This is an important degree of personal protection for entrepreneurs ramping up their business activity (and with it, their exposure to risk).
Some general guidelines for LLC formation:
The bottom line: Choosing the LLC format is one of the best things you can do to safeguard your business during a season of growth or expansion.
One additional note: If you do decide to opt into Corporation status, that’s the point at which you’ll likely want to hire a business attorney, who can help you navigate issues related to selling shares and forming a Board of Directors (both legal requirements for Corporations).
In addition to considering your legal structure, there are a few other legal concerns that small business owners should keep top-of-mind as they pursue growth.
Usually, expanding your business means expanding your team. As you get ready to build out your staff, you’ll want to ensure you have a thorough knowledge of local, state, and federal hiring laws. In particular, you may need to create employee contracts and non-discrimination policies. Understanding wage and hour laws is also important. Finally, be aware that some regions may have specific requirements for benefits, including health coverage for your employees.
Whether you’re creating your own computer code, developing your own software, or simply using specific logos and branding, intellectual property protections should absolutely be on your radar. Copyrights and trademarks can both ensure that your proprietary assets are yours and yours alone, and that other businesses are disallowed from using them without some sort of licensing agreement.
Legal contracts can help protect all parties involved. For example, when growing your business, you may want to take some time to review or renegotiate the contracts you have with your vendors and suppliers. Verify whether your contracts have any legally enforceable elements to them. Also take some time to develop new customer agreements. It can be highly beneficial to generate new customer agreements or terms of service to reflect any changes in your products or services, protecting your business through a period of expansion.
Of course, there are plenty of regulatory concerns that can vary from one state or municipality to the next. For example, you may need to pay attention to things like zoning laws, health and safety regulations, and industry-specific statutes. And if you expand into a new region, you may need to familiarize yourself with a whole different set of regulations.
Do you need a license or permit to operate your business? It just depends on where you’re located and what type of work you do. Again, if you’re expanding your business into a new marketplace, you may wish to study up on local ordinances to ensure you have all the right legal documentation.
As you consider branching out your entrepreneurial endeavors, it’s essential to keep legal considerations in view. Start by thinking through your legal structure, and from there, make sure you’re doing everything you need to do in terms of IP protections, employment and contract law, licensing, and beyond.
Alex Quin is a full-stack marketing expert and global keynote speaker. Founder and Chief Marketing Officer of UADV Marketing - a member of the Forbes Agency Council.
