Opening a small business can be an exciting and enriching experience. You get to introduce an enterprise to your industry that is informed by your unique perspectives and ideas. Yet, it’s also important to recognize that running a company involves a range of responsibilities.
The majority of these duties fall into legal and financial categories. In some cases, the obligations of business owners straddle both. Unless your company operates in a way that maintains the highest standards in these areas, it can be difficult to find the success you hope your business will attract.
If that’s the case for your small business, take a look at the following legal and financial steps every small business should take.
Select The Right Structure
Not all businesses function in the same way. There will be different priorities, risks, and growth directions for each. It is, therefore, important to recognize that there is no single ideal structure for all small enterprises. One of your first key steps to building your company is choosing and implementing the right business structure for yours.
In some instances, it may be practical to operate as a sole trader or independent contractor. Many entrepreneurs choose this when they start out with their enterprise as a side hustle to test the waters. However, if you have any ambitions for growth and intend to commit full-time to the company, you’ll need to utilize something more suited to your purpose.
Setting up a partnership helps to spread the legal and financial responsibilities between you and another party. However, this type of structure still means you can both be held personally liable for debts and lawsuits.
If there are elements of risk involved with your small business, it can be wise to adopt a structure that essentially makes the business a separate entity from you. This can limit liability and also tends to allow you to gain tax advantages. Setting up a limited company can be quite complex, requiring you to submit articles of association and register with Companies House in the UK.
If you plan to open satellite businesses so you can do business internationally, you may also need to register a structure with each territory. In the U.S., registering as a limited liability company (LLC) can vary depending on the state you intend to operate from. In most cases, it can be wise for foreign owners to utilize a registered agent to navigate the process. Nevertheless, you’re likely to have to file elements such as an LLC-suffixed name for your business, personal details of the owners, and a mission statement.
Protect Your Brand Identity
Your brand identity is a powerful tool for your business. It helps to solidify your place in the market and creates points of recognition with your consumers.
Some aspects of your brand identity will be more abstract, such as your values and your brand voice. But other aspects create tangible connections with your audience. Unfortunately, without protections in place, these elements may be exploited by other businesses.
The first step is to protect your name in the marketplace. When you arrange for your business licensor incorporation documents, you should have a name in mind. Your approach to choosing your name should certainly involve considerations of how effectively it represents your business. It also can’t suggest inaccurate claims of expertise, as this could also leave your company exposed to lawsuits from consumers or regulatory bodies.
It’s also important that you aim to find a unique name. This means that, upon registering, you have grounds to prevent competitors from using similar names in ways that could mislead consumers about who they’re doing business with.
You should also consider your visual brand components. Your business logo should be informed by current graphic design trends to ensure it is relevant in the contemporary climate and that consumers want to engage with it. It should also be unique enough to stand out, perhaps incorporating hand-drawn elements or even vibrant nostalgia that reflects the personality of your company. This uniqueness can be open to imitation, though. So, it’s also important for you to trademark your logo to ensure you have legal protections against misuse.
Create A Risk Management Strategy
Businesses are subject to a range of risks. Some of these will be common to small companies in general, while others will be nuanced and related to specific industries. In either case, these can derail an enterprise legally and financially. It is, therefore, vital to create an effective risk management strategy.
In most instances, it’s wise to involve the majority of your staff in this process. They will have different areas of expertise and experience. This can lend you deeper insights into where the prevalent risks are and what steps should be taken to mitigate, prevent, and respond to them. The assessment should also be repeated a few times a year to take into account additional or changing risk factors.
You should also take time to formalize your risk management plan. Create both physical and digital documents related to this and ensure all key staff members have access to them. You should also commit to providing training to staff on how to respond to threats and how hazards relate to their day-to-day actions.
Remember that sufficient business insurance must also form part of your strategy. This mitigates the potential for risks to financially cripple your company.
Every small business has important obligations and priorities concerning its financial and legal activities. Selecting the most appropriate structure for your business can help you mitigate liabilities that might put your personal assets at risk.
You’ll also find that protecting your brand identity with name registrations and logo trademarks means you can respond effectively to unethical competitor behaviour.
A risk management strategy is essential for identifying hazards and protecting your staff, consumers, and business. When you have these elements in place, your small business can proceed on strong footing.