Forming and operating a small business can be a daunting task. Combine that with an ultra-competitive outdoor industry and it's easy to see why many smaller outdoor-oriented businesses can fail. In small business and large corporations alike, it's important to have a solid legal foundation. This blog will explore some of the basic items needed to make sure you're protected. Feel free to contact Bertolatus Rodman PLLC with your business concerns and needs.
Business Formation
The first step in creating your business is forming your business. Deciding what entity type is best for your business is crucial. There are different types of business entities in Texas including limited liability companies, limited partnerships, corporations, etc. If you read our blog here then you might have an idea of what is needed. In Texas, you can visit the Texas Secretary of State SOS Direct website and login as a guest to search for business name availability. Typically, we ask a client for at least 3 names they would prefer in case any are taken or there is already a substantially similar name. There are options to reserve a name for future use should you not want to form your business immediately. Once a name is decided, preparing and filing a certificate of formation will create your small business entity according to the State of Texas and generate a filing number that is mailed to you with other filing paperwork.
Once you receive a filing number, a company/partnership (operating) agreement (or shareholder's agreement depending on the entity type) and a unanimous written consent agreement should be drafted and executed by members and/or managers for company records. Generally, we prepare these documents in conjunction with the certificate of formation. Once these items are completed, a federal employer identification number, or EIN, should be obtained from the Internal Revenue Service.
Bank Account
Once your business has been formed and your documents are in order, you'll need a bank account to begin operating. Obviously, whichever bank or credit union you choose is up to you. Some banks offer better deals or different restrictions than others. Certain banks or credit unions may even offer a line of credit when you open an account. The choice is up to you.
In order to open an account, you will need copies of the filing documents you received from the State of Texas, copies of your unanimous written consent agreement and a copy of your EIN. Some banks may require a copy of your operating agreement as well. It's generally a good idea to take copies of all paperwork to avoid a second trip.
Assumed Names (d/b/a)
Now that you have an official business with the State of Texas and business bank account, you should obtain an assumed name, otherwise known as a d/b/a (“doing business as”). This name is your brand name. Several companies use assumed names that are very different that the company name. Your assumed name should reflect what your want your brand or business to be known by. For example, any company called Bigtime Lures, LLC could reserve the assumed name of “Bigtime Lures” if it's available. If the assumed name is already taken, you can simply continue to choose names until one is available then reserve it.
Form 503 provided by the Texas Secretary of State is the assumed name form we fill out for our clients. Once completed, Form 503 must be filed with the Texas Secretary of State along with the filing fee ($25.00) at the address provided on the form. The maximum duration for assumed names in Texas is 10 years. You will need to make sure you renew before the 10-year mark to retain your assumed name status.
Insurance
There is a small saying I always tell our clients and that's “your business is only as good as your insurance”. Insurance is one of the most important legal protections you can have for your small business. Proper insurance will not only deal with a short-term incident but the long-term fallout and liability of your business. Without insurance, you can lose everything you have worked so hard to build including your equipment and inventory.
There are many types of insurance available. Some of those include business loss insurance, property and casualty insurance, professional liability insurance, product liability insurance, etc. Each type of insurance covers different potential liabilities and scenarios. If it's not in writing, it's very likely NOT covered so make sure to read the proposed policy carefully or have an attorney review it for you. If you plan on manufacturing outdoor goods for sale, product liability insurance is a MUST! A short article about product liability providers is available here.
Having insurance is so important it should be counseled to every client when forming their business. Should a lawsuit arise, your insurance will help you defend your business and avoid costly legal fees. Insurance can also give you a peace of mind to continue operating your business while dealing with liability claim issues. Be sure to contact your insurance agent about obtaining proper business insurance coverage.
DISCLAIMER
The information is not offered as legal advice upon which anyone may rely. Information in this article is provided for public informational and educational purposes only. No attorney-client relationship is created by the offering or reading of this article. This law firm does not represent you until expressly retained by written agreement. It is recommended that you seek legal and professional counsel for your individual circumstances prior to taking any action with legal implications.
