Business Formation

Wednesday, October 22, 2014

Managing Risk in Your Small Business

While starting your own business can be one of the greatest things you ever do, it does not come without risk.  Risk can come in many forms including disaster, debt and legal liability. Successful business owners are cognizant of the risks involved in owning and operating their venture and must manage these risks at every juncture.    Fortunately, there are things that you can do to protect yourself in these situations.

First, you must think about risk even before forming your business.  A major part of how your business manages risks comes from your business structure.  Sole proprietorships and partnerships do not offer the personal asset protection that corporations and limited liability companies (LLCs) do.  The corporation and LLC are considered separate legal entities and therefore their owners and managers are usually not personally liable for debts of the business, except in certain specific situations.  Overall, the structure of your business will have an impact on how you manage risk.

Once your business is formed, it is imperative that you obtain the appropriate insurance.  Some businesses are mandated by law to carry certain types of insurance.  Even if yours is not, you should always have some form of liability coverage.  General liability, errors and omissions insurance, specific coverage for corporations and many other types of insurance are available.  You should choose the insurance that is right for your business and stay up to date so that there is never a lapse in coverage.  

Even though you have taken steps to manage your risk, you should still act cautiously in your day to day operations. Do not to make statements in any forum that can be considered defamation.  It is also important that you pay attention to who you do business with as their reputation can and will be imputed to your business should a controversy arise.  In addition, do you best to avoid conflicts of interest as they can result in your business being viewed in a negative light and possibly expose you up to personal risk and liability.  

All small business owners should develop a relationship with an experienced attorney early on.  It is essential to the success of a small business to retain someone to advise you on risk management.  Austin, Texas business law attorney Sanjeev Kumar can help.  Call (512)323-6060 for a consultation today.

Tuesday, October 7, 2014

Cottage Food Law Reform Has Increased Entrepreneurship in Texas

There is a new movement among Americans- people are earning a living from food made in their home kitchens.  Bakers, canners and gardeners are starting their own businesses and selling their cottage foods to consumers.

Texas has recently passed and reformed the Cottage Food Law legalizing this activity in the Lone Star State.  
The Cottage Food Law was originally passed in 2011 and allowed individuals to sell baked goods, preserves and dried herbs out of their homes.  Then in 2013, the Texas legislature expanded the law to include many different kinds of foods, including but not limited to, candy, coffee and popcorn at craft fairs and other venues.  The revision of the law has also stopped municipalities from using their zoning laws to prohibit the production of cottage foods.  While they could once stop individuals from conducting this type of business out of their residential kitchens, they are now barred from doing so.  While the law has opened up a variety of doors for those wishing to sell homemade foods, there are a number of restrictions.  Cottage food makers cannot produce foods that have the potential to be hazardous to consumers.  They must also complete a food handling course and obtain a certificate of completion.  These courses are readily accessible and affordable.  In addition, all products must be appropriately packaged and accurately labeled in order to be sold.  

Cottage food laws have allowed and inspired many entrepreneurs to start their own businesses out of their homes.  While statistics on the number of businesses started are not available, over one thousand individuals have taken courses specifically related to cottage food handling over the last year.  These laws are enabling businesses to operate with low or no overhead costs and are therefore giving individuals an option that was not available before.  

Although the cottage food business is one that you can engage in out of your home kitchen it is still important to adhere to all of the formalities applicable to any other business.  An experienced business law attorney can assist you with legal concerns associated with formation and operation of a business.  If you are considering starting a cottage food business, or any other type of venture, call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 for a consultation today.

Friday, September 19, 2014

What Type of Business is Right For You?

You want to go into business for yourself.  You have developed a business plan, secured the necessary funds and are ready to invest in formation and get your business off the ground.  The first thing you need to do is decide how your business will be organized.  There are many different types of structures available depending upon the size and nature of your business.  The main factors to consider are ownership, taxes and personal liability.

You must consider ownership when choosing a business form.  If you are going to own the business yourself, or with a limited number of other individuals, a sole proprietorship or partnership might be a good fit.  These types of businesses are usually fairly easy and inexpensive to start and maintain.  If your business will be owned by more than a few and/or an indefinite number of individuals, a corporation or limited liability company might be right for you.  Corporations and LLC’s, depending on their structure, allow for a business to have many owners.  These types of businesses are subject to more technical requirements than their counterparts to become established, but they are a good choice for many entrepreneurs.

We all have to pay taxes on our income and the same rules apply to businesses. The business form you choose has an effect on the taxes that you pay.  For example, corporations and LLC’s are usually eligible for more tax benefits than sole proprietorships and partnerships.  When it comes to corporations, the tax treatment depends upon the type (S or C corporation).

Individuals are held responsible for the liabilities of their businesses on a regular basis.  Some business forms can prevent your personal assets from being factored into the equation.  Corporations and LLC’s shield business owners from being personally responsible for business liabilities in most situations.  Sole proprietorships and partnerships do not offer this protection, so if you are likely to be involved in litigation or are taking considerable business loans, you might want to think twice before using these business forms.

It is essential at this point to think about where your business is starting and where you see it going.  Do not worry, if you need to change the business structure to suit your needs in the future, it can be done.  If you are considering starting your own business and need advice as to the structure, call Austin, Texas business formation attorney Sanjeev Kumar at (512)323-6060 for a consultation today.

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