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7 Deadly Sins of the DIY Business Registration

You have a business idea! You have created products you want to sell! You're excited and ready to go! Your focus is on providing services, attracting customers, and hiring a good team. That can be a lot to handle by itself.



Most entrepreneurs want their legal needs handled as quickly and efficiently as possible, so they can get back to the business of running the business. Being bothered with legal formalities is not on the priority list most of the time, and the temptation to take shortcuts or put them off to later can be very strong.


1. Waiting Until You’re in Trouble to Set Up Legal Protections

It is no secret that the United States is the most litigious society in the world. While many of these lawsuits are a necessary component of our legal system, it is nor secret that a certain portion of these lawsuits are based on nothing more than an attempt by one party to generate a financial come up from a targeted defendant.

Asset protection is based on the principle that since assets held in your name (minus a few exceptions) can be seized by a judgment creditor, assets not held in your naThis is where asset protection comes into play.


But, if you haven’t set up legal protections before you are sued, it can’t help you once you have been. That’s too late. Being proactive is the only thing that works. Denial won’t help you and ignorance is not a legal defensive. It's smart to have a team of professionals to answer your questions and to help you avoid common issues that come with being a business owner. Accountants and Lawyer have to get educated, trained, and licensed to practice in their field. Google is not match for expertise and experience.


2. Not Setting Up a Legal Entity for Your Business or Property

An entity is a separate legal being, such as a corporation, limited liability company (LLC) or limited partnership (LP). An entity is a business organized according to state law to limit the liability of the owners. DIYers- An entity can’t protect you if it is not set up right at the start. Furthermore, it can’t protect you if you don’t properly maintain your entity over the long term.


3. Not Picking the Right Legal Entity

Choosing the correct entity is one of the most important decisions you can make. This one decision will dictate how you prepare your taxes, how you keep your books, how much of your business’s income you keep and how much you don’t. It will dictate your profits and losses and the financial security. Do not take the decision of which corporate entity you choose lightly. There is no part of your business that will not be affected by it.


Copy and Paste models don't always work, so be careful taking advice from friends and general information spread randomly on social media . Nothing in finance, health, or business is one size fits all.


4. Not Having a Registered Agent

Every corporation, LLC, or Limited Partnership must have a registered agent (also known as a “resident agent,” “statutory agent” or “agent of process”) in their state of formation and in any state the company qualifies to do business in. The registered agent ensures you receive all important legal documents such as service of process (meaning a notice of a lawsuit) and official governmental notices.


You can be your own registered agent in some states, but some also require that you be open from 8 a.m. to 5 p.m. If you listed your house as the registered agent location, you might not always be home and that could be a violation.


In the case of a lawsuit, it is important to be notified as soon as possible since most states only allow you 30 days to answer the complaint. Without an answer, you will typically lose the case. It is important to deal with a professional, established company who will get notices to you promptly.


5. Forgetting about Trademark, Copyright or Patent Protection

Registering a trademark is an important step in any business venture – one that should not be overlooked. By protecting the name of your business, products or services, you ensure that others cannot use the trademarked words or designs.

If you fail to secure such protection, anyone can start using your ideas, and in some cases they may demand that you stop using what they now claim is their trademark.


6. Failing to Meet Legal Requirements Resulting in Lost Legal Protections

This is caused by having incomplete paperwork for your entity. You see advertisements for $99 (or less) corporation. This entails filing the Articles of Incorporation or Articles of Organization with the state. That’s all.


Sometimes you are not told that you need bylaws, a registered agent, an operating agreement, minutes of the organizational meeting or the issuance of ownership certificates, among other requirements called corporate formalities. Without these things you are not protected.


7. Poorly Drafted Operating Agreements

It is recommended that you seek legal counsel for a fully comprehensive OA. You can draft one at formation until you are able to find a lawyer.

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