Factors to Consider in Forming a New Company – Part 1

It can be overwhelming to start a new company. There are numerous decisions that must made, so you must prioritize them accordingly. This is a two-part blog outlining general items new entrepreneurs should consider when forming their entity. Below are a few key issues that all new business owners should consider:

• Company formation . One of the most important decisions you will make when forming a new company is selecting the legal structure for it. You may be tempted to save money and use a “do-it-yourself” kit, but this often costs the business owner substantially more down the road. It is usually much more expensive to correct a problem than to do it right from the beginning. A knowledgeable lawyer can assist founders with setting up proper ownership, contractual relationships and governing procedures for a new entity, which are vital to a strong foundation for a company.
• Written ownership agreements only . Business owners should not rely on verbal agreements regarding a new company’s ownership and equity. These types of agreements are one of the main sources of disputes and typically are difficult to document afterwards. Additionally, written agreements should be drafted regarding stock restrictions, what happens when a founder leaves the company and a variety of other critical matters that must be addressed from the beginning.
• Intellectual property . All of the owners should assign the applicable intellectual property to the company upon its formation. Also, all owners, key employees, consultants and other third-parties should be required to sign non-disclosure agreements that protect the intellectual property and other proprietary information. You should also consider whether your start-up company’s name is available through your state’s registry, as well as whether you can obtain the desired Internet domain and trademark rights you want.