Begin Several Months in Advance
For the majority of entrepreneurs and new business owners, time is a precious commodity. Finding time is a challenge. When launching a new business, it is critically important to follow a proper timeline. Failure to execute the new business start-up steps in advance and also in the correct order can cost a fledgling company much-needed funds and limit its ability to function. More importantly, waiting until the last minute to handle important tasks can seriously jeopardize a business’s likelihood of success.
For most start-ups I recommend that the prospective owners begin work at establishing the business a minimum of six months before they plan to open the doors and start. This leeway provides sufficient time to organize the business legally, obtain necessary approvals, and establish the business. With this approach, when a business opens its doors, it is ready to run.
The following are some of the initial steps that should not be left until the last minute:
Create a Unique Business Name
There are several considerations that contribute to choosing a business name. For a variety of reasons, business owners must choose a name that is not too similar to an existing Arizona business name. The name should not infringe on an existing federal trademark. Ideally, it should also be available as an Internet domain. Ideally a new business will organize the company and receive approval from the Corporation Commission (and any other key government entities) several months in advance.
Separating Personal and Business Accounts
Many first-time business owners make the mistake of relying on personal credit to launch a new business. Understandably, they do not always have access to business credit as a means of funding a new business. By pledging personal assets, they expose themselves to business creditors. In addition, comingling of personal with business assets allows a potential adverse party to as well.
Planning for Intellectual Property
Copyright, tradename, and trademark law is complex. Business owners must ensure they do not violate other businesses’ work, while at the same time guaranteeing they protect their own efforts. The business should also take the steps to protect its name and important intellectual property from the beginning.
Drafting Business Contracts
Many business owners are tempted to create their own contracts or rely on agreements they find in Internet searches. Although this may initially seem like a money-saving step, it can be a critical and costly mistake in the long run. Arizona courts construe ambiguous contracts against the drafting party. Harford v. National Life & Casualty Ins. Co. (1956), 81 Ariz. 43, 45, 299 P.2d 635, 637; see also, Sears Roebuck and Co. v. Avery (2004), 593 S.E.2d 424 (North Carolina applying Arizona law). Business owners who create confusing, misleading, or simply incomplete contracts just to save a little money could end up losing a significant amount of funds should a dispute later develop. By working with an experienced business attorney, a new business owner can stop worrying about the legal details and focus on successfully running their business.
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