Unemployment: A Glass Half Full

More new businesses were started in 2009 than in any other time in the past 14 years; a clear indication that hard economic times often invigorate the American entrepreneurial spirit. Starting a new business can be exhilarating, but entrepreneurs are well advised to consult with an experienced business attorney, accountant, and marketing specialist before opening the doors, in order to properly assess the true potential of the enterprise, and analyze and plan for the risks.

You obviously need to give your business a name, but you should first do some research to determine if your preferred name has been trademarked by someone else, or has any negative connotations associated with it. Ideally, a domain name for the business that is identical is available, which is a good indication that no one is using it. Even if the domain name is too long or unwieldy to use as your website, it’s nevertheless a good idea to reserve it, if only to prevent anyone else from doing so.

As for negative connotations, any marketing consultant will caution you to avoid picking a name that means something offensive or embarassing in another language. Just look at what happened back in the 70’s with the Chevy Nova, when GM learned how tough it is to sell a car in Latin America when its name in Spanish means “no go.”

Contrary to popular belief, it is not necessary to register your name or trademark with the U.S. Patent and Trademark Office to receive protection. Our legal system recognizes what are known as common law rights, which essentially grants the first person to use and promote a business name the exclusive right to use it in connection with the business, regardless of whether the name is registered. However, there are significant advantages to registering a mark through the USPTO.

Once you have your name, the next step is to determine whether you should establish a legal entity (such as a corporation or LLC) for the business. This is crucial whenever the operation of the business generates potential liability for the operator. Remember, one of the primary advantages of incorporating is to shield the owners against personal liability for the debts and obligations of the business. The potential for accidents or injuries is sometimes obvious based on the nature of the business (i.e., a limousine service), but more often than not the risks are hidden, and an experienced attorney can help you pinpoint them. You should also examine your options for insurance coverage, another essential step towards insulating yourself against risk.

You’ll also need to determine whether your business is subject to licensing and permit requirements, which is often the case for activities that impact public health, care for children, provide transportation, provide professional advice, or store flammable materials. Remember to address the issue of permits and licensing before you sign a lease. If you’re denied a permit for some reason, the last thing you want is to be stuck with a three year commitment for a space you can’t even use.

You must also establish bank and merchant (credit card processing) accounts. Be certain to shop around, as some discount rates are much higher than they should be. The discount rate depends upon the chargeback risk associated with the business- online sales and service-based businesses are often singled out for high rates and fees. Also keep in mind that merchant account processors will often withhold payment should your chargeback level exceed a certain threshold. This can literally ruin any business that depends on the cash flow.

A business attorney experienced in assisting startups has faced these issues many times before, and are an excellent source for this type of information.



Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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