Growing a business is not easy and business owners make the same costly legal mistakes.
You’re working hard and churning your wheels, but there’s this nagging in the back of your brain about all of the legal aspects that still need to be taken care of. Although, I can’t help with the overwhelm (therapy and meditation helps, I promise!), today I am going to give you 5 tips on how to grow a business online. When you are growing your business online, there are steps you will need to take to protect yourself and your business from liability. The legal business growth tips below are some steps are just the tip of the iceberg on steps that you should be taking.
1. Form an LLC or corporation.
There are 4 types of business entities: sole proprietorship, partnership, limited liability company (LLC), and a corporation. When you are forming your business, you may start as a sole proprietorship or partnership. As you grow, you’ll want to create an LLC or corporation depending on the type of business you have and how you want to be taxed.
An LLC is a business entity that shields the owners from being personally responsible for the LLC’s debts and lawsuits. If the company gets sued, you’re less at risk of losing your home or personal bank accounts to pay a judgment.
If you form an LLC or corporation, this entity shields your personal assets if someone sues you. Depending on your election with the IRS, you may be able to save money on self-employment taxes. In addition, if your business is a start up or you plan on having investors, forming a corporation makes you look professional and it is easier to raise capital because of the sale of stocks. Also, investors are more likely to work with a corporation as they are most familiar with this type of entity. It’s much easier to scale and grow a business once you have investors in place.
2. Choose your tax designation.
LLCs and S- Corporations are pass through entities which means that the entities are not subject to federal income tax. The IRS will tax the owner individually on their income. The IRS taxes LLCs as one of a sole proprietorship or partnership, depending on the number of owners. Basically, the owner will report all of the income from the LLC on their personal income tax return and pay personal income tax on the company’s profits. A C-Corporation is subject to double taxation. The IRS taxes a C-Corporation’s profits, as well as the shareholders dividends if the corporation distributes the profits as dividends.
If you elect an S-Corporation, you can bypass double taxation and possibly paying personal income tax on all of the company’s profits. The LLC or corporation must meet certain requirements, but instead of reporting all of the income of the company on a personal income tax, the owner(s) must pay themselves a reasonable salary, which will be subject to Social Security, Medicare, federal, and state income tax (if applicable). If there are remaining profits after you pay yourself a reasonable salary, that profit will not be subject to self employment tax, and you can take it as a dividend (bonus).
3. Grow a business and brand with a trademark.
As you are growing your business, your business will start getting brand recognition. A consumer can recognize your brand by words, a design (logo), or a sound (like the NBC chimes). By trademarking your name or logo, no one else can use your name or logo to profit off of the brand you created.
If you want to register a trademark, you will have to register the word, logo, or sound with the United States Patent and Trademark Office (USPTO). You’ll want to make sure that your name is not similar to an already registered trademark before applying using the USPTO trademark search engine.
Once you apply, the USPTO checks your trademark against their database. The USPTO has to confirm that the mark was not previously registered or a likelihood of confusion. If everything checks out with the USPTO, they will register your trademark and no one else can use it without your permission.
4. Copyright your content.
As an influencer, blogger, or business, you have worked too hard for someone to just swoop in and copy your ideas. While growing your business, you want to make sure that copyright your creations. A copyright can be a book, website, photography, music, plays, and the list goes on. Copyrighting gives you the legal rights to use your content in anyway that you want.
To register for a copyright you have to go through the Copyright Office. There are different categories to copyright your content, such as literary works, visual arts, performing arts, sound recordings, and single serial issues. Once the Copyright Office approves your registration, you will receive a certificate of registration.
These terms and conditions guide users how to behave on your site and how visitors should use your information. Your terms and conditions should include:
- Intellectual property rights
- Refund policy
- Limitation of liability
Final thoughts on how to grow a business
Growing a business online is a lot of work and it will not happen overnight. You need to make sure you have the correct legal foundation so that as your business continues to grow, your business isn’t costing you more than it’s making. You’ll want to be sure to protect yourself from liabilities and prevent lawsuits before they happen.
Have you implemented these tips in your business yet? If you haven’t, use these tips on how to grow your business online to get your business off the ground.
If you’re still spinning your wheels about what you need to do for legal protection in your business, pick up The CEO Legal Kit. This guide helps you understand how to implement the legal aspects into your business so that your business can grow and scale.