The Legal Strategy You Need to Start Your Business

 

Congratulations on starting your own business! You may have been dreaming of starting your own business for a while so you can travel the world or maybe you just stumbled upon entrepreneurship through a hobby or out of necessity. Either way, welcome to the entrepreneur club. Now that you’re here, you’re probably wondering where to start with everything – and especially with your legal strategy. You’re in the right place.

The best thing you can do for your business’s legal strategy is to tackle it head on (note: hiding under a rock is not a legal strategy). Here are the first steps in setting up a sound legal strategy:

1. Put Your Legal Foundations In Place

If I had a dollar for every time someone asked me if they should form a legal entity rather than stay a sole proprietor, I would have the best passive income stream. Unless you like the possibility of risking your personal assets, the answer is usually YES, you should set one up. Forming a legal entity is about protecting yourself and your business. Creating a legal entity to run your business – and entering into your contracts as your business – is one of the easiest things an entrepreneur can do to set themselves on the right path. It creates a separation between you as an individual and your business so that what you’re on the hook for personally vs. what your business is on the hook for are different.

2. Contract for Your Product or Services

Every business should have a central, main contract that covers what your business does. In a products based company, it’s “you are buying x in exchange for y”, and in a service based business, it’s “we are providing x service in exchange for y,” with “y” being money. The contract should also address key aspects of working together like how payment is made, whether refunds are allowed, how to terminate the contract and when termination allowed, among other key concepts. This will probably be the most important contract you have in your business, and having a well-drafted contract can get you out of and keep you out of trouble.

3. Disclaimers

What is a disclaimer and why does your business need it? A disclaimer is a statement or statements that specifically says when your business is not responsible for something. Your main contract should have a disclaimers section that will limit liability, but it’s a good idea to have disclaimers that carve out risks specific to your business. For instance, if you are a personal trainer, it would be a good idea to have a disclaimer that says you don’t provide medical advice and aren’t responsible for any injuries your client faces. Disclaimers are a good place to identify any major areas of risk in your business.

4. Website Policies

Every website needs certain policies, specifically a privacy policy and a terms of use. A privacy policy informs users of your website what information you collect and what you do with that information. Privacy policies have become required by law, and you’ll need to have one to be compliant. Terms of Use tells visitors of a website what they can and can’t do on the website and can include terms and conditions that apply to the products you sell on your website. Think of Terms of Use as the “rules” of your website.

5. Other Contracts and Contract Sections Specific to Your Services

Like all good legal questions, the answer to “what contracts do I need for my business” is “it depends.” The contracts you need for your business are the ones that address the risks of your specific business. The unique risks of your business come from what type of business you have, how you are delivering your products or services, where you’re delivering them, how you receive payment, and other characteristics about your business. This might seem confusing, but think about it – the risks involved with offering online coaching services are very different than the risks involved with hosting an off-site surf yoga retreat in a foreign country. Contracts are about protection for your business, and the truth is that the type of protection your business needs depends on the type of business you have.

 

Disclaimer: Any information you obtain on this site is educational in purpose only and is not, nor is it intended to be, legal advice. Yu Law LLC recommends consulting an attorney for advice regarding your individual situation before implementing any information provided here.