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The Basic Legal Aspects of an Effective Business Plan

As we enter the final month of the year and excitement grows for the holiday season many people may not realize December also holds a special designation for business owners and aspiring entrepreneurs. It is National Write a Business Plan Month . And while the holidays often serve as a time for reflection on the year that was, developing a business plan forces business owners to look forward and put constructive thought into the years ahead.

No matter what stage a business is at, it is always beneficial to develop and strengthen a strategic plan. A well-drafted business plan serves as a strong foundation for a successful business. The plan acts as a road map directing what the business will do, how it will grow, the markets its will serve, the manner in which it will operate, the struggles it may encounter and the goals it hopes to achieve. Similar to a road map, your business may encounter roadblocks and detours requiring you to rethink the plan’s path, but ultimately an effective business plan will force the owner to think critically and objectively about the future of the business and should continuously serve as a compass for the company going forward.

Along with addressing overarching business matters, the development of the business plan presents a great opportunity to address certain legal matters that may seem minor today but can prevent major stress down the road.

One of the biggest decisions a business faces at the outset is determining how it will be structured. The chosen structure will have lasting implications related to business operations, liability protections, and tax strategies. The most common business structures are limited liability companies, corporations, and partnerships. The entity you chose will likely require state filing and may necessitate obtaining a tax identification number from the IRS and State Department of Revenue.

In addition to determining business entity type, an effective business plan must consider all applicable federal, state and local laws that may be applicable to its operations for each location it intends to conduct business. These considerations keep the business ahead of the curve when it comes to obtaining necessary licenses or permits to operate. The business must also consider local zoning ordinances for each physical location from which it will operate in order to ensure the location is suitable for the operation. Effective planning in these areas helps avoid future hurdles that could delay expansion into a new market and hinder growth.

Finally, the business should consider contracts and legal agreements that may be necessary in its operations. While many of these documents will develop over time and need not be specifically addressed in the business plan, they should be given some forethought as the business considers its operations. Specific contracts that may require particular attention in the business plan are Confidentiality and Non-Disclosure Agreements. These documents are not absolutely necessary in every business venture, but in the right circumstances they can be crucial to the development or growth of the business. By entering into Confidentiality and Non-Disclosure Agreements the business owner will be able to talk freely about the innovative ideas and creative potential of the business without concern that the information will be stolen or publicly disclosed. The more sensitive the information the higher the likelihood the business will require strong Confidentiality and Non-Disclosure agreements.

Ultimately, these are just a few of the issues a business owner must address and there are many other matters that should be taken into consideration when developing a strategic plan. A business owner need not develop the plan alone. They may consult with experts in tax, law, and business as well as trusted individuals invested emotionally or financially in their success. While the business plan will not address every detail that may impact the company, it should plot the road the business will follow. Establishing an effective plan for the business will pave a way that leads to success down the road.

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Legal Considerations for Business Success: A Step-by-Step Guide

Excitement over writing a business plan often leads to neglecting legal considerations. Yet, they are fundamental to ensuring your venture thrives beyond the initial spark. Building a strong legal foundation starts with choosing the right business structure and navigating regulations. This lays the groundwork for your business to thrive. Don’t let legal compliance for a business become an afterthought; consider it the cornerstone of your success. Ensuring your business Operating legally is crucial for long-term business success.

Key Highlights

• Legal considerations are crucial for business success: While excitement for a new business is great, ensuring legal compliance shouldn’t be an afterthought. It’s the cornerstone of long-term success.
• Key legal aspects to address: Choosing the right business structure, navigating regulations, mitigating risks, protecting stakeholder interests, and managing data privacy are vital areas to consider.
• Proactive measures for smooth sailing: Implement clear contracts, secure insurance coverage, understand non-compete agreements, and seek legal counsel for guidance through the complex legal landscape.
• Don’t go it alone: Leverage resources like free business plan templates and professional writing services to ensure your plan is legally sound and your business operates within the law.

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Choosing the Right Legal Entity

Your legal journey begins with choosing the right business entity . Choose these key elements carefully! Deciding between a sole proprietorship, partnership, or corporation has different legal effects, impacting your liability and taxes.

Sailing the Regulatory Seas

The business world is awash with laws and regulations: tax laws, labor laws, environmental regulations, intellectual property rights, and more. Your business plan should chart your course through these often-choppy waters. Are you prepared to meet tax obligations, ensure fair labor practices, and comply with environmental standards?

Mitigating Risks and Liabilities

Every business venture comes with inherent risks. Contracts can go awry, disputes may arise, and legal battles could loom. Your business plan should outline strategies to identify, assess, and mitigate these risks. Think of it as your legal lifeboat, ready to weather any legal storms that may come your way.

Protecting Stakeholder Interests

Your business doesn’t exist in isolation. It interacts with various stakeholders – owners, potential investors, employees, customers, suppliers – each with their own set of legal interests. Your plan should detail how you’ll safeguard these interests, ensuring fairness and compliance in all dealings.

Tax Filing and Documentation

Establishing a system for accurate and timely tax filing and documentation is crucial for avoiding penalties and audits later. Consider seeking professional guidance from an accountant or tax advisor to ensure compliance and optimize your tax strategy.

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Data Protection and Privacy Compliance

If your business handles customer data, prioritize compliance with relevant regulations like GDPR or CCPA. Implementing robust data security measures and transparent privacy policies builds trust with customers and protects sensitive information. Consult with legal experts to understand your obligations and implement proper safeguards.

Clear, Detailed Contracts and Agreements

Protect your business and stakeholders with clear, well-drafted contracts that define rights and responsibilities. Include clauses addressing intellectual property ownership, dispute resolution, and termination terms. Consider consulting with a lawyer to ensure your contracts are legally sound and address your specific needs.

Securing Insurance Coverage

Obtain appropriate insurance coverage to mitigate potential financial losses arising from accidents, lawsuits, or unforeseen events. Explore options like general liability, property, and business interruption insurance. Consult with an insurance advisor to assess your risks and tailor a comprehensive plan.

Non-Compete Agreements

If you’ve signed non-compete agreements with previous employers, carefully review the terms to understand any limitations they may impose on your new venture. Seek legal guidance if uncertain about the implications of these agreements and to ensure your business operates within their boundaries.

The Legal Counsel Connection

Legal matters can be intricate and vary by jurisdiction and industry. Consulting with qualified legal professionals is essential. These experts can provide invaluable guidance, helping you navigate the complex legal landscape. Don’t navigate the legal landscape alone!

• Get expert help from a qualified legal professional .
• Download our free business plan templates to see how legal considerations in business are addressed.
• Take advantage of our comprehensive business plan writing services to ensure your plan is legally sound and secure.

By taking the right steps now, you can set your business on a path to success, free from legal roadblocks.

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A business plan isn’t just about numbers and strategies; it’s about ensuring your business operates within the law. By giving due consideration to legal aspects from the outset, you not only protect your venture but also set it on a path to lawful success. Remember, a little legal foresight can go a long way in securing your business’s future.

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16 Important Legal Requirements for Starting a Small Business

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Starting a new business is a challenging pursuit. Part of what makes it so complicated is all the legal implications that come with starting a business. As a business owner, you want to make sure you have covered all your legal bases to avoid any fines, lawsuits, or—worst case—even jail time.

Fortunately, there are plenty of legal resources available to small businesses both online and through hired legal counsel. Use this list as a jumping off point, covering the legal requirements for starting a small business. Checking these off your to-do list will help you ensure that you don't run afoul of any laws. The sooner you take care of these things, the sooner you can focus on what you do best—selling your product or service.

LLC Formation

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16 legal requirements for starting a small business

1. designate the proper business entity..

First things first. Choose the proper business entity or structure for your startup. This is crucial because it affects your personal liability, what you pay in taxes, and your fundraising ability. Possible structures include sole proprietorship, general and limited partnership, C-corporation, S-corporation, and limited liability company. Once you decide which structure is best for your company, you need to officially designate it through your secretary of state.

Most small businesses start out as sole proprietorships or partnerships because these require minimal paperwork and set up time. However, these types of businesses also don't offer sufficient liability protection for business owners. A corporation or LLC is generally a better choice as your business grows, particularly if you're planning to secure a business loan or raise venture capital.

» MORE: LLC vs. corporation

2. Check which licenses, permits, and registrations your business needs.

Depending on your type of business and where it’s located, you might need specific business licenses and permits from your country, state, county, or city. Licenses, permits, and registrations come in many variations. Examples include local business licenses, building permits, health safety-related permits, permits for home-based businesses, fire permits, industry-related permits (like running a legal practice, hospitality, construction, or manufacturing business), liquor licenses, and more.

The possibilities are many, so make sure to do thorough research—perhaps with the help of your counsel—on what you need to be compliant with the law in your area. Your city or county's business licensing agency is also a good place to start.

3. Make sure you are paying proper business taxes.

Every business owner is legally required to pay taxes. This includes income tax, self-employment taxes, and for some businesses, sales tax. It's wise to hire an accountant or tax advisor to make sure you are compliant with all tax laws. Accounting software for startups can also help you figure when to file taxes and what forms you need to fill out.

Most small business owners can't wait until March or April to pay taxes. The IRS has a pay-as-you-go tax schedule for businesses, requiring business owners to pay estimated taxes on a quarterly basis. Make sure you check the IRS requirements for your business type to avoid any fines and back taxes.

4. Do proper bookkeeping.

In most places, you are obligated by law to record all business transactions according to a specific accounting method. See what’s required of you for your industry and location in terms of record-keeping obligations, and set up a proper filing and bookkeeping system for all documents and transactions. This will greatly help you down the line in doing taxes or if you ever run into other legal troubles.

5. Get a founders agreement in writing.

If your business operates with multiple business owners, it’s important to make sure that each person knows and understands their rights and responsibilities in relation to the business. How this comes about depends on your business structure. If you form a corporation, you need a proper shareholder agreement and articles of incorporation. If you form an LLC, you will need articles of organization and an LLC operating agreement. You also need designated legal counsel to make sure the agreements and articles are sound.

6. Set a vesting schedule for all founders and early employees.

This is a practical measure many startups often overlook when they’re just starting out and excited about getting off the ground. But this will protect your business down the line and ensure a certain level of commitment each founder or early employee brings to the table.

Creating a vesting schedule upon incorporation states that stock ownership will vest over time, preventing investors from selling all their stock whenever they please. Note that most investors require this measure before they'll make any initial investments.

7. Get your employer identification number (EIN).

In order to open a corporate bank account and to properly file your business tax returns, many businesses need an employer identification number (EIN). You can easily request one for free from the IRS over the phone or by using an online application on the IRS website. Only sole proprietorships and single-member LLCs with no employees are exempt from this requirement.

You need the social security number of the person completing the form for the company (usually the president or CEO). Include information on your business entity and date of incorporation. Make sure to keep a signed copy of this application in your files.

8. Protect your intellectual property (IP).

Intellectual property is the bread and butter of many businesses. IP includes patents, copyrights, trademarks, and trade secrets as well. Be sure to file any patents as soon as possible—a process that can take more than five years. Protecting your intellectual property will be attractive to investors—but it will also help you sleep easier at night. Having exclusive rights to reproduce and display your work will make your life much, much easier down the line and ensure that no one tries to rip any IP rugs out from under you.

IP can be vastly complicated from a legal standpoint, so it might be wise to consult an experienced IP attorney who can help you through the process and provide you the greatest protection.

9. Classify your workers properly.

Many startups often misclassify their early employees. It’s important to know what kind of worker you’re hiring—essentially, the difference between an independent contractor vs. employee. This is important for tax reasons for both you and the employee and will help clarify what is and isn’t expected from you and the employee. If you misclassify an employee as an independent contractor, you could be on the hook for costly penalties and back wages.

10. Purchase workers' compensation insurance.

In all states but Texas, most businesses with employees are legally required to purchase workers' compensation insurance . Coverage should begin from the very first day your employee starts working. This insurance covers medical and legal costs associated with work-related employee injuries and illnesses. State laws about workers' compensation vary, so make sure you check your state's rules.

11. Make sure you’re in compliance with securities laws.

Founders and investors of LLCs, C-corporations, and partnerships are subject to federal and state securities laws. These laws were made to require companies to provide reliable and accurate information about their businesses to enable a fair market. They also protect from insider trading and trading fraud.

Failure to comply with these laws can result in the startup having to repurchase all of its shares at the issuance price, even if the company has lost all of its money.

12. Follow email regulations.

Email marketing is a huge part of many businesses. When you send emails to your customers or when you are targeting potential customers via email campaigns, you need to find out what the applicable email regulations are. Note that each country has its own set of rules.

Aspects covered by these rules generally include opt-in versus opt-out, B2B or B2C emails, unsubscribe rules, and minimum information to be included in your emails.

13. Make sure your investors are accredited.

The current definition of an accredited investor under the Securities and Exchange Commission rules includes eight categories of investors, but the most general investor accreditation means that the person:

Has at least $1 million in the bank

Has at least $200,000 in annual income

Understands and is willing to take the investment risk

The SEC has guidelines for what constitutes “reasonable efforts” on these accounts. It’s possible to raise funds outside the narrow limitation of accredited investors, but it will open up a Pandora’s box in terms of securities and compliance enforcement. So, if you want to be the most legally sound you can possibly be, go through accredited investors.

14. Establish a privacy policy.

A privacy policy is a legal statement that specifies what a business does with the personal data collected from users or customers, along with how the data is processed and why. Violation of privacy laws can lead to criminal liability—depending on your state, this can mean hefty fines—so it’s important that startups have proper privacy policies in place and carefully adhere to them. The Small Business Administration has a great guide for establishing an appropriate privacy policy for your business.

15. Create a company handbook.

Once you have all the legal headaches sorted out and sounded, make sure everyone in the company is aware and understands your company’s legal liabilities just as well as you do—as a business owner, you could be liable for anything your employees do while representing your organization.

Company or employee handbooks are a great way to instill the values and legal boundaries of your company. It can also help to establish what is and isn’t appropriate behavior internally and externally. Have your legal counsel look this over well or even help you write it, and then get the company together to go over the material.

16. Hire competent legal counsel.

In case this hasn’t been clear throughout, work with lawyers on these complicated legal issues from the start. Startups are often so concerned about expenses that they overlook the importance of sound legal advice that could save them thousands, if not millions, down the line. You really can’t put a price on having the right attorneys on your side.

Ideally, you’ll hire an experienced business attorney on employment law, contract law, securities law, and intellectual property law. You could hire a “general counsel” on your staff at some point, but it’s common for the work to be spread out between different firms and attorneys. The cost is worth avoiding any legal trouble.

The bottom line

Starting a business is hard—don’t let anyone tell you otherwise. But if you are meticulous about getting your startup legal checklist in order, you’ll save yourself from some serious headaches down the line. Some of these items are things you can take care of yourself. But for more complicated tasks, or if you run into questions, it's important to hire a competent attorney to help you.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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How to Choose the Best Legal Structure for Your Business

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Choosing the right legal structure is a necessary part of running a business. Whether you're just starting out or your business is growing, it's crucial to understand the options.

Table of Contents

Your business’s legal structure has many ramifications. It can determine how much liability your company faces during lawsuits. It can put up a barrier between your personal and business taxes – or ensure this barrier doesn’t exist. It can also determine how often your board of directors must file paperwork – or if you even need a board. [Related article: What to Do if Your Business Gets Sued ]

We’ll explore business legal structures and how to choose the right structure for your organization. 

What is a business legal structure?

A business legal structure, also known as a business entity, is a government classification that regulates certain aspects of your business. On a federal level, your business legal structure determines your tax burden. On a state level, it can have liability ramifications.

Why is a business legal structure important?

Choosing the right business structure from the start is among the most crucial decisions you can make. Here are some factors to consider:

• Taxes: Sole proprietors, partnership owners and S corporation owners categorize their business income as personal income. C corporation income is business income separate from an owner’s personal income. Given the different tax rates for business and personal incomes, your structure choice can significantly impact your tax burden.
• Liability: Limited liability company (LLC) structures can protect your personal assets in the event of a lawsuit. That said, the federal government does not recognize LLC structures; they exist only on a state level. C corporations are a federal business structure that includes the liability protection of LLCs.
• Paperwork: Each business legal structure has unique tax forms. Additionally, if you structure your company as a corporation, you’ll need to submit articles of incorporation and regularly file certain government reports. If you start a business partnership and do business under a fictitious name, you’ll need to file special paperwork for that as well.
• Hierarchy: Corporations must have a board of directors. In certain states, this board must meet a certain number of times per year. Corporate hierarchies also prevent business closure if an owner transfers shares or exits the company, or when a founder dies . Other structures lack this closure protection.
• Registration: A business legal structure is also a prerequisite for registering your business in your state. You can’t apply for an employer identification number (EIN) or all your necessary licenses and permits without a business structure.
• Fundraising: Your structure can also block you from raising funds in certain ways. For example, sole proprietorships generally can’t offer stocks. That right is primarily reserved for corporations.
• Potential consequences for choosing the wrong structure: Your initial choice of business structure is crucial, although you can change your business structure in the future. However, changing your business structure can be a disorganized, confusing process that can lead to tax consequences and the unintended dissolution of your business. 

Types of business structures

The most common business entity types are sole proprietorships, partnerships, limited liability companies, corporations and cooperatives. Here’s more about each type of legal structure.

Sole proprietorship

A sole proprietorship is the simplest business entity. When you set up a sole proprietorship , one person is responsible for all a company’s profits and debts.

“If you want to be your own boss and run a business from home without a physical storefront, a sole proprietorship allows you to be in complete control,” said Deborah Sweeney, vice president and general manager of business acquisitions at Deluxe Corp. “This entity does not offer the separation or protection of personal and professional assets, which could prove to become an issue later on as your business grows and more aspects hold you liable.”

Proprietorship costs vary by market. Generally, early expenses will include state and federal fees, taxes, business equipment leases , office space, banking fees, and any professional services your business contracts. Some examples of these businesses are freelance writers, tutors, bookkeepers , cleaning service providers and babysitters.

A sole proprietorship business structure has several advantages.

• Easy setup: A sole proprietorship is the simplest legal structure to set up. If you – and only you – own your business, this might be the best structure. There is very little paperwork since you have no partners or executive boards.
• Low cost: Costs vary by state, but generally, license fees and business taxes are the only fees associated with a proprietorship.
• Tax deduction: Since you and your business are a single entity, you may be eligible for specific business sole proprietor tax deductions , such as a health insurance deduction.
• Easy exit: Forming a proprietorship is easy, and so is ending one. As a single owner, you can dissolve your business at any time with no formal paperwork required. For example, if you start a day care center and wish to fold the business, refrain from operating the day care and advertising your services.

The sole proprietorship is also one of the most common small business legal structures. Many famous companies started as sole proprietorships and eventually grew into multimillion-dollar businesses. These are a few examples:

• Marriott Hotels

Partnership 

A partnership is owned by two or more individuals. There are two types: a general partnership, where all is shared equally, and a limited partnership, where only one partner has control of operations and the other person (or persons) contributes to and receives part of the profits. Partnerships can operate as sole proprietorships, where there’s no separation between the partners and the business, or limited liability partnerships (LLPs), depending on the entity’s funding and liability structure.

“This entity is ideal for anyone who wants to go into business with a family member, friend or business partner – like running a restaurant or agency together,” Sweeney said. “A partnership allows the partners to share profits and losses and make decisions together within the business structure. Remember that you will be held liable for the decisions made as well as those actions made by your business partner.”

General partnership costs vary, but this structure is more expensive than a sole proprietorship because an attorney should review your partnership agreement. The attorney’s experience and location can affect the cost. 

A business partnership agreement must be a win-win for both sides to succeed. Google is an excellent example of this. In 1995, co-founders Larry Page and Sergey Brin created a small search engine and turned it into the leading global search engine. The co-founders met at Stanford University while pursuing their doctorates and later left to develop a beta version of their search engine. Soon after, they raised $1 million in funding from investors, and Google began receiving thousands of visitors a day. Having a combined ownership of 11.4% of Google provides them with a total net worth of nearly $226.4 billion.

Business partnerships have many advantages. 

• Easy formation: As with a sole proprietorship, there is little paperwork to file for a business partnership. If your state requires you to operate under a fictitious name ( “doing business as,” or DBA ), you’ll need to file a Certificate of Conducting Business as Partners and draft an Articles of Partnership agreement, both of which have additional fees. You’ll usually need a business license as well.
• Growth potential: You’re more likely to obtain a business loan with more than one owner. Bankers can consider two credit histories rather than one, which can be helpful if you have a less-than-stellar credit score.
• Special taxation: General partnerships must file federal tax Form 1065 and state returns, but they do not usually pay income tax. Both partners report their shared income or loss on their individual income tax returns. For example, if you opened a bakery with a friend and structured the business as a general partnership, you and your friend are co-owners. Each owner brings a certain level of experience and working capital to the business, affecting each partner’s business share and contribution. If you brought the most seed capital for the business, you and your partner may agree that you’ll retain a higher share percentage, making you the majority owner.

Partnerships are one of the most common business structures. These are some examples of successful partnerships:

• Warner Bros.
• Hewlett-Packard
• Ben & Jerry’s

Limited liability company 

A limited liability company (LLC) is a hybrid structure that allows owners, partners or shareholders to limit their personal liabilities while enjoying a partnership’s tax and flexibility benefits. Under an LLC, members are shielded from personal liability for the business’s debts if it can’t be proven that they acted in a negligent or wrongful manner that results in injury to another in carrying out the activities of the business.

“Limited liability companies were created to provide business owners with the liability protection that corporations enjoy while allowing earnings and losses to pass through to the owners as income on their personal tax returns,” said Brian Cairns, CEO of ProStrategix Consulting. “LLCs can have one or more members, and profits and losses do not have to be divided equally among members.”

According to Wolters Kluwer , the cost of forming an LLC comprises the state filing fee and can vary depending on your state. For example, if you file an LLC in New York, you must pay a $200 filing fee, a $9 biennial fee, and file a biennial statement with the New York Department of State .

Although small businesses can be LLCs, some large businesses choose this legal structure. The structure is typical among accounting, tax, and law firms, but other types of companies also file as LLCs. One example of an LLC is Anheuser-Busch, one of the leaders in the U.S. beer industry. Headquartered in St. Louis, Anheuser-Busch is a wholly owned subsidiary of Anheuser-Busch InBev, a multinational brewing company based in Leuven, Belgium.

Here some other well-known examples of LLCs:

• Hertz Rent-a-Car

Corporation 

The law regards a corporation as separate from its owners, with legal rights independent of its owners. It can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks. Corporation filing fees vary by state and fee category. 

There are several types of corporations, including C corporations , S corporations, B corporations, closed corporations, and nonprofit corporations.

• C corporations: C corporations, owned by shareholders, are taxed as separate entities. JPMorgan Chase & Co. is a multinational investment bank and financial services holding company listed as a C corporation. Since C corporations allow an unlimited number of investors, many larger companies – including Apple, Bank of America and Amazon – file for this tax status.
• B corporations: B corporations, otherwise known as benefit corporations, are for-profit entities committed to corporate social responsibility and structured to positively impact society. For example, skincare and cosmetics company The Body Shop has proven its long-term commitment to supporting environmental and social movements, resulting in an awarded B corporation status. The Body Shop uses its presence to advocate for permanent change on issues like human trafficking, domestic violence, climate change, deforestation and animal testing in the cosmetic industry.
• Closed corporations: Closed corporations, typically run by a few shareholders, are not publicly traded and benefit from limited liability protection. Closed corporations, sometimes referred to as privately held companies, have more flexibility than publicly traded companies. For example, Hobby Lobby is a closed corporation – a privately held, family-owned business. Stocks associated with Hobby Lobby are not publicly traded; instead, the stocks have been allocated to family members.
• Open corporations: Open corporations are available for trade on a public market. Many well-known companies, including Microsoft and Ford Motor Co., are open corporations. Each corporation has taken ownership of the company and allows anyone to invest.
• Nonprofit corporations: Nonprofit corporations exist to help others in some way and are rewarded by tax exemption. Some examples of nonprofits are the Salvation Army, American Heart Association and American Red Cross. These organizations all focus on something other than turning a profit.

Corporations enjoy several advantages. 

• Limited liability: Stockholders are not personally liable for claims against your corporation; they are liable only for their personal investments.
• Continuity: Corporations are not affected by death or the transferring of shares by their owners. Your business continues to operate indefinitely, which investors, creditors and consumers prefer.
• Capital: It’s much easier to raise large amounts of capital from multiple investors when your business is incorporated.

This structure is ideal for businesses that are further along in their growth, rather than a startup based in a living room. For example, if you’ve started a shoe company and have already named your business, appointed directors and raised capital through shareholders, the next step is to become incorporated. You’re essentially conducting business at a riskier, yet more lucrative, rate. Additionally, your business could file as an S corporation for the tax benefits. Once your business grows to a certain level, it’s likely in your best interest to incorporate it.

These are some popular examples of corporations:

• General Motors
• Exxon Mobil Corp.
• Domino’s Pizza
• JPMorgan Chase

Learn more about how to become a corporation .

Cooperative 

A cooperative (co-op) is owned by the same people it serves. Its offerings benefit the company’s members, also called user-owners, who vote on the organization’s mission and direction and share profits.

Cooperatives offer a couple main advantages.

• Increased funding: Cooperatives may be eligible for federal grants to help them get started.
• Discounts and better service: Cooperatives can leverage their business size, thus obtaining discounts on products and services for their members.

Forming a cooperative is complex and requires you to choose a business name that indicates whether the co-op is a corporation (e.g., Inc. or Ltd.). The filing fee associated with a co-op agreement varies by state. 

An example of a co-op is CHS Inc., a Fortune 100 business owned by U.S. agricultural cooperatives. As the nation’s leading agribusiness cooperative, CHS reported a net income of $422.4 million for fiscal year 2020. These are some other notable examples of co-ops:

• Land O’Lakes
• Navy Federal Credit Union
• Ace Hardware

Factors to consider before choosing a business structure

For new businesses that could fall into two or more of these categories, it’s not always easy to decide which structure to choose. Consider your startup’s financial needs, risk and ability to grow. It can be challenging to switch your legal structure after registering your business, so give it careful analysis in the early stages of forming your business. 

Here are some crucial factors to consider as you choose your business’s legal structure. You should also consult a CPA for advice.

Flexibility 

Where is your company headed, and which type of legal structure allows for the growth you envision? Turn to your business plan to review your goals and see which structure best aligns with those objectives. Your entity should support the possibility for growth and change, not hold it back from its potential. [Learn how to write a business plan with this template .]

When it comes to startup and operational complexity, nothing is more straightforward than a sole proprietorship. Register your name, start doing business, report the profits and pay taxes on it as personal income. However, it can be difficult to procure outside funding. Partnerships, on the other hand, require a signed agreement to define the roles and percentages of profits. Corporations and LLCs have various reporting requirements with state governments and the federal government.

A corporation carries the least amount of personal liability since the law holds that it is its own entity. This means creditors and customers can sue the corporation, but they can’t gain access to any personal assets of the officers or shareholders. An LLC offers the same protection but with the tax benefits of a sole proprietorship. Partnerships share the liability between the partners as defined by their partnership agreement.

An owner of an LLC pays taxes just as a sole proprietor does: All profit is considered personal income and taxed accordingly at the end of the year.

“As a small business owner, you want to avoid double taxation in the early stages,” said Jennifer Friedman, principal at Rivetr. “The LLC structure prevents that and makes sure you’re not taxed as a company, but as an individual.”

Individuals in a partnership also claim their share of the profits as personal income. Your accountant may suggest quarterly or biannual advance payments to minimize the effect on your return. 

A corporation files its own tax returns each year, paying taxes on profits after expenses, including payroll. If you pay yourself from the corporation, you will pay personal taxes, such as those for Social Security and Medicare, on your personal return. 

If you want sole or primary control of the business and its activities, a sole proprietorship or an LLC might be the best choice. You can negotiate such control in a partnership agreement as well.

A corporation is constructed to have a board of directors that makes the major decisions that guide the company. A single person can control a corporation, especially at its inception, but as it grows, so does the need to operate it as a board-directed entity. Even for a small corporation, the rules intended for larger organizations – such as keeping notes of every major decision that affects the company – still apply.

Capital investment

If you need to obtain outside funding from an investor, venture capitalist or bank, you may be better off establishing a corporation. Corporations have an easier time obtaining outside funding than sole proprietorships.

Corporations can sell shares of stock and secure additional funding for growth, while sole proprietors can obtain funds only through their personal accounts, using their personal credit or taking on partners. An LLC can face similar struggles, although, as its own entity, it’s not always necessary for the owner to use their personal credit or assets.

Licenses, permits and regulations

In addition to legally registering your business entity, you may need specific licenses and permits to operate. Depending on the type of business and its activities, it may need to be licensed at the local, state and federal levels.

“States have different requirements for different business structures,” Friedman said. “Depending on where you set up, there could be different requirements at the municipal level as well. As you choose your structure, understand the state and industry you’re in. It’s not ‘one size fits all,’ and businesses may not be aware of what’s applicable to them.”

The structures discussed here apply only to for-profit businesses. If you’ve done your research and you’re still unsure which business structure is right for you, Friedman advises speaking with a specialist in business law.

Max Freedman and Matt D’Angelo contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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7 Top Legal Considerations When Starting a Business

by Staff Writer | Jun 22, 2020 | Management and Operations

Nothing can be more exciting than the thought of opening your own business. But you have to go through numerous processes when starting your own company, so much so that your excitement can easily dissipate just thinking about them.

Top lawyers say that learning about and dealing with the legal issues that come with starting your venture first can help you go through these processes correctly and efficiently. You will also reduce the likelihood of making costly and time-consuming mistakes that can delay or negatively affect your plans of opening your business.

The Legal Aspects of Opening a Business

When starting your own business , there are a number of legal requirements that you have to satisfy or adhere to. The most important ones are:

1 – The legal structure of your business

One of the many important decisions you have to make when starting a business is to decide on the legal status or structure of your company. Your chosen legal structure will affect how you run your business. It will also have implications on how you pay your taxes and keep your accounts.

The most widely used business legal structures are:

● Limited partnership ● Sole proprietorship ● Limited Liability Company (LLC) ● Corporation ● S-corporation

To decide on which status is best for your new business, consider all liability issues that may be associated with your company. Think about which type of tax structure will be best for your business as well.

2 – Trademark

Before selecting your business’s official name, perform a meticulous search online first. Find out if there is another business operating under the name you’ve come up with for your new venture. Do this to avoid infringing upon another company’s trademark and getting caught up in a trademark opposition action .

Once you’ve selected your official company name, consider registering your trading name and logo (if you already have one) as a trademark. This will prevent others from registering their company under the same name.

3 – Licenses

You will need several types of licenses or permits before you open your business. The number of licenses your business will require will depend on the kind of establishment you want it to be. At the very least, you will need a business license, trading license, and sales tax permit.

If you plan to open a restaurant, pub, or catering company, you will have to register with the local governing body for food standards and health and safety oversight. If you plan to provide entertainment in your establishment, you will also need to get the relevant permits for music and entertainment.

It is best to do some additional research and contact relevant local government agencies to learn more about the specific licenses you will need to legally run your business.

4 – Zoning laws

If you are still looking for a good location for your shop, establishment or office, you have to make sure that the area you are eyeing is properly zoned for the type of business you plan to operate. Again, do some research or ask local government bodies to be certain that you can open your business in that area.

Do not make the costly mistake of assuming that your zoning is appropriate just because your business is similar to the ones already located there. There will be instances wherein zoning may have changed while the other businesses were already operating, and these companies may have been given exemptions that won’t be provided to new establishments such as yours.

5 – Relevant health and safety laws

As a business owner, you will have to assume several important health and safety responsibilities. These include ensuring that your employees work in a safe, healthy environment.

You also have the duty to look after the well-being of anyone including clients and visitors inside, outside, and near your business premises.

It is highly recommended that you carry out a risk assessment to help identify the risks posed to individuals by your business activities. You then have to mitigate these risks or hazards as much as possible. This may include changing some standard operating procedures and removing some fixtures to ensure that employees and members of the public are safe.

6 – Insurance

Most business zones require all businesses that employ a number of workers to get employer’s liability insurance. But aside from being a legal requirement, when you have sufficient coverage, you will avoid incurring fines every day that you are uninsured. You also avoid leaving yourself vulnerable to compensation claims from employees and visitors who may get injured or sick while they are in your premises.

Aside from an employer’s liability insurance, you may want to consider investing in public liability or professional indemnity as well. These types of coverage will help protect your business from compensation claims if something goes awry.

7 – Confidentiality and Non-Disclosure Agreements

Lastly, if you will be working with a bank or other partners for business financing or entering into contracts with suppliers, make sure you have the right confidentiality and non-disclosure agreements.

These parties will have access to business information that you may want to keep private and, as such, you should consider preparing these contracts. Make sure your partners and suppliers sign them as well.

Knowing which laws apply to your new business is something that is also important if you want to open a company overseas. If you want to expand globally, make it a priority to consult a trusted corporate law firm to guide you every legal step of the way.

Our guest author Al Tamimi is senior partner at law firm Al Tamimi & Company.

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Understanding the Legal Aspects of Business Planning

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Introduction

When it comes to business planning, it is important to understand the legal aspects of the process. Legal aspects are those aspects that are related to the law—they involve state and federal regulations, as well as company policies and procedures. This article will provide an overview of business planning and the legal aspects involved.

Definition of Legal Aspects

Legal aspects are an important part of a company's overall business plan. They are the rules and regulations that govern how a business operates within the framework of the law. They involve a wide range of topics, including intellectual property, taxes, contracts, regulatory compliance, and more. Understanding and adhering to legal aspects is essential for businesses seeking to avoid legal disputes and remain in compliance with applicable laws.

Overview of Business Planning

Business planning is the process of developing long-term strategies and objectives for a business. It involves analyzing a business' financials, market conditions, competitors, and overall industry trends in order to create a roadmap that will guide the business toward its goals. The process also involves understanding and accounting for legal aspects, such as corporate laws, contract law, antitrust laws, and employment laws.

Sources of Law

For an effective business planning, it is important to be aware of the various sources of laws that can affect the business. Understanding the legal aspects of business planning is essential for the success and longevity of the business.

At the most basic level, municipal laws are enacted by local jurisdictions, such as cities and counties. These laws provide regulation and guidance that can affect aspects of the business, such as zoning, licensing, building codes, and taxes. By understanding the municipal laws in the area, business owners can plan accordingly and ensure their businesses are compliant.

In addition to municipal laws, provincial laws govern business activities within Canada. These laws provide guidelines and regulations on a range of topics, such as employment standards, consumer protection, and environmental protection. These laws are often more comprehensive than municipal laws, and business owners should familiarize themselves with the provincial laws in their province in order to ensure compliance.

At the highest level, federal laws govern activities and transactions within all of Canada. These laws provide a framework for businesses nationwide and provide guidance on topics such as trade, securities, and intellectual property. Business owners must pay close attention to federal laws in order to ensure compliance with national regulations.

Legal Considerations

When planning a business, it is essential to also consider the legal aspects that accompany the process. Creating a business requires one to understand the various legal considerations, and evaluate how the business will be structured, taxed, and how contracts and other agreements must be handled.

Business Structure

The first major legal consideration for a business is to choose a business structure. A business structure outlines the way a business is legally organized, and the main types of business structures are limited liability company (LLC), sole proprietorship, partnership, corporation, and cooperative. Each structure has different requirements in regards to licenses, taxes, and liability and should be chosen based on the type of business, the number of owners, and the plans for growth.

It is important to understand the various tax laws that apply to businesses. The types of taxes that businesses must abide by generally include corporate taxes, income taxes, sales taxes, and payroll taxes, and each of these taxes must be properly managed. Additionally, businesses must ensure that all applicable tax regulations are followed in order to avoid penalties.

Contracts and Agreements

Contracts and other agreements are an important legal aspect of running a business. Before entering into any kind of agreement, businesses must assess the potential risks and liabilities as well as the potential benefits and be aware of any applicable laws. Contracts should be well-drafted to ensure that all parties are protected, and should include all relevant terms, obligations and conditions. It is also important to properly document all contracts and agreements, as this will help ensure that all parties are on the same page and that all obligations are fulfilled.

Importance of Labour Laws

Labour laws protect the employee from exploitation from employers, and ensure their health, safety and security at their workplace. It also ensures that employees have a fair and reasonable working environment. Employers need to be fully aware of these laws and regulations, so that they can regulate their business around them.

Employment Standards

The labor laws specify several key employment standards that employers must comply with. This includes the minimum wage (fixed by the country), payment of overtime wages, hours of work and working conditions that must be met.

Health & Safety

This is an important factor that employers need to be aware of. Employers must ensure that the workplace is safe, with appropriate safety measures, such as wearing protective gears, proper ventilation, and hazardous substances and materials are stored safely. This helps minimize the risks of employee injuries and illnesses.

Human Rights

Labor laws also protect the rights of employees in the workplace. This includes prohibiting discrimination in the workplace, ensuring equal pay for equal work, and freedom of association. This helps to ensure that there is no unfair advantage given to any group in the workplace.

5. Intellectual Property

Intellectual Property (IP) is a legally protected property that is the creation of the mind and is normally used to refer to a business’s intangible assets, such as trademarks, copyrights, and patents. In order to create, maintain and protect a successful business plan, it is important to understand and recognize the various types of intellectual property.

A. Trademark

A trademark is a distinctive sign that is used to identify the products and services of a specific business. It is typically associated with the name, symbol or logo that a business uses to designate its goods and services. The purpose of a trademark is to distinguish a business’s goods and services from others, and it also serves to protect a business’s reputation and goodwill. In order to register a trademark, the business must apply to the USPTO (U.S. Patent and Trademark Office).

B. Copyrights

Copyright is a form of legal protection that is designed to protect the creative expressions of authors, creators, and companies. It is the exclusive right to reproduce, publish, or perform a work. In order to be eligible for copyright protection, the work must meet certain requirements, such as that it is of an original expression created by an author, and it must be fixed in a tangible form which allows it to be reproduced. Copyrights are typically registered with the U.S. Copyright Office.

A patent is a form of intellectual property that grants the owner the exclusive right to use, manufacture, and sell an invention for a specific period of time. A patent must meet certain criteria in order to be eligible for protection, such as that it must be new and inventive, and it must also have a new and useful purpose. Patents are typically filed with the USPTO and are typically in force for twenty years.

Financial Regulations

Financial regulations are essential for any business regardless of its size or industry. It is important to understand these regulations so that business owners can ensure that their operations remain in compliance and avoid costly penalties. Financial regulations involve reporting requirements for the issuing of securities, filing of financial statements and adherence to accounting standards.

Financial Statements

Financial statements are documents that report the financial status of a business. These statements typically include an income statement, balance sheet and statement of cash flows and must be filed with the relevant regulatory bodies each year. Businesses must accurately and honestly report their financial position in order to comply with regulations and demonstrate their financial wellbeing to investors and creditors.

Businesses must also adhere to certain accounting standards. The Generally Accepted Accounting Principles (GAAP) offer a framework of guidelines that must be followed so as to ensure the accuracy and transparency of financial statements. Failing to comply with these regulations can result in penalties and fines, so it is important for business owners to understand and adhere to GAAP rules.

Securities regulations involve certain requirements for businesses looking to issue stocks, bonds or other securities. These regulations ensure the protection of investors by requiring full disclosure of all relevant information concerning the issues of securities. Failing to adhere to these regulations can result in fines or criminal charges so it is important to ensure that all securities regulations are strictly followed.

Understanding the legal aspects of business planning is vital for the smooth operation of any business. Legal considerations must be taken into account for the successful setup, operation, and expansion of the business. The most important legal considerations include deciding on the business structure, obtaining permits and licenses, complying with tax laws, registering trademarks, protecting intellectual property, and avoiding legal disputes.

Summary of Legal Considerations

In this blog post, we discussed the essential legal considerations that must be taken into account when creating a business plan. These considerations include:

• Choosing the right business structure
• Obtaining necessary permits and licenses
• Complying with tax laws
• Registering trademarks
• Protecting intellectual property
• Avoiding legal disputes

By understanding and following the legalities of business planning, entrepreneurs can ensure that their businesses operate smoothly and within the law.

Invitation to Seek Professional Advice

Navigating through all the legal considerations involved in business planning can be a daunting task for entrepreneurs. For this reason, it is highly recommended to seek professional advice from a qualified and experienced legal professional when creating a business plan. Professional advice can save entrepreneurs time and money in the long run.

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Legal and regulatory considerations in a business plan

Table of Content

Introduction

As you develop your business plan, there are a lot of considerations that need to be taken into account. One of the most important factors is legal and regulatory compliance. Failing to comply with relevant laws and regulations can lead to serious consequences, including fines, legal action, and damage to your brand reputation. In this blog, we will discuss all about the other factors to consider during legal and regulatory considerations for a business plan and tips to navigate legal and regulatory considerations.

Factors to consider during legal and regulatory considerations for a business plan

To ensure that your business is compliant and protected, it is essential to understand the key legal and regulatory considerations. In this guide, we will outline the most important considerations and provide tips to navigate legal and regulatory considerations.

Understanding Regulations and Laws

The first step in navigating legal and regulatory considerations for your business plan is to understand the relevant laws and regulations. Depending on the nature of your business, you may need to comply with federal, state, and local regulations. Some industries, such as healthcare and finance, are heavily regulated, while others, such as retail, may have fewer regulations to contend with.

It is important to research the specific regulations and laws that apply to your business. This may include permits and licenses, zoning laws, environmental regulations, labor laws, and more. Failure to comply with these regulations can result in fines, legal action, and other penalties.

Risk Management

Once you have identified the relevant regulations and laws, the next step is to assess the risks associated with your business. Risk management is the process of identifying potential risks and developing strategies to mitigate or avoid them. Some common risks that businesses face include financial risks, legal risks, reputational risks, and operational risks. For example, if your business handles sensitive customer information, you may face legal and reputational risks if that information is compromised.

To manage these risks, it is important to develop policies and procedures that address potential risks. This may include implementing security measures to protect customer information, ensuring that employees are trained in proper procedures, and regularly reviewing and updating your risk management plan.

Protecting Intellectual Property

Intellectual property refers to creations of the mind, such as inventions, designs, and artistic works. It is important to protect your intellectual property to prevent others from using or profiting from your ideas without your permission.

There are several types of intellectual property, including patents, trademarks, copyrights, and trade secrets. To protect your intellectual property, it is important to understand the relevant laws and regulations and take steps to protect your creations. This may include filing patents or trademarks, registering copyrights, and implementing policies and procedures to protect trade secrets.

Contracts and Licensing

Contracts and licensing agreements are important legal documents that govern the relationship between your business and other parties. For example, you may need to enter into contracts with suppliers, distributors, and customers.

It is important to understand the terms of these agreements and ensure that they are legally binding and enforceable. This may include consulting with an attorney to review contracts and ensure that they meet legal requirements.  

Staying Up-to-Date with Regulations

Finally, it is important to stay up-to-date with regulations and laws that may affect your business. Laws and regulations are constantly evolving, and failing to comply with new or updated regulations can lead to serious consequences. To stay informed, consider joining industry organizations or associations that provide updates on regulatory changes.

Legal and regulatory compliance is a critical consideration for any business plan. By understanding the key legal and regulatory considerations, you can create a business plan to navigate these challenges and protect your business.

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Top Tips for Creating a Business Plan: Legal Considerations and Best Practices

Creating a business plan requires more than just a good idea. It plays a crucial role in securing your business’s future. This article will guide you through the essential legal steps and strategic best practices to ensure your business plan is both comprehensive and legally sound. Topics include choosing your business structure, protecting intellectual property, and complying with data protection laws.

Key Takeaways

• A solid business plan is essential for guiding a new venture, attracting investors, and adapting to market changes and risks.
• Choosing the right business structure, such as a sole proprietorship, partnership, LLC, or corporation, impacts tax obligations, fundraising capabilities, and personal asset protection.
• Compliance with legal considerations, including registering your business name, protecting intellectual property, obtaining adequate insurance, and adhering to data protection laws, is crucial for business legitimacy and risk management.

Importance of a Solid Business Plan

Business pioneers recognize the importance of a solid, well-structured business plan in guiding ventures through the challenging startup world. It’s more than a mere document; it’s a strategic blueprint that articulates your vision, maps out the journey ahead, and invites others to join the quest. Establishing a solid business plan is the first step in protecting your business, as it lays the groundwork for all subsequent decisions and actions. It’s the anchor that fortifies your entrepreneurial ship against the unpredictability of the market, enabling you to navigate through opportunities and potential risks with the confidence of having a clear, strategic vision.

Think of the business plan as:

• A testament to your business’s potential
• A narrative that convinces investors and stakeholders to invest in your vision
• A mirror reflecting your business’s strengths, weaknesses, opportunities, and threats
• Crafted through meticulous industry, market, and competitive research
• A dynamic tool that evolves with your business
• Adapting to new insights and feedback from trusted professionals
• Helps in refining your strategy and identifying areas of improvement.

Key Components of a Business Plan

A masterful business plan is an orchestra of key components, each playing a significant role in the symphony of your business’s story. At the forefront is the executive summary, a snapshot capturing the essence of your plan and the ambition driving your business. It’s followed by a detailed business description that outlines the mission, objectives, and the unique value your business intends to deliver to its target customer base.

Further in the plan, the market analysis explores the industry landscape, examining competitors and trends to carve out a niche for your business. The marketing plan, a crucial subset of your strategy, delineates the sales tactics you’ll employ to captivate your target market and differentiate your brand from the rest. And let’s not overlook the financial projections; these figures are not mere numbers but the fiscal heartbeat of your business, projecting its financial health for the years to come.

Choosing the Right Business Structure

Choosing the right business structure is like selecting the foundation for a building; it sets the stage for your business entity’s strength and resilience. The decision influences everything a business entity requires, from income tax obligations to your ability to raise funds and even how you register your business.

Here are some common business structures to consider for a small business owner:

• Sole proprietorship: offers simplicity and tax benefits but also places your personal assets at risk.
• Partnership: allows for shared decision-making and profits, yet requires mutual trust and understanding, as partners are jointly responsible for the business’s obligations.
• Limited liability company (LLC): provides personal liability protection and flexibility in management and taxation.
• Corporation: offers the most protection for personal assets and allows for raising capital through the sale of stock.

Consider your specific needs and consult with a legal or financial professional, including the Internal Revenue Service, to determine the best structure for your business, as well as the right business bank account to conduct business.

Venturing further, the Limited Liability Company (LLC) structure provides entrepreneurs the coveted shield of limited liability while still enjoying the benefits of pass-through taxation. Corporations, both C and S, offer robustness in terms of investment attraction and shareholder structures, with each having its nuances, such as the S corporation’s favorable tax designation but with limitations on the number and type of shareholders.

Understanding these structures is paramount, as the legal structure you choose will underpin all aspects of your business operations and growth potential.

Registering Your Business Name

Your business name is more than a label; it serves as the banner for your company’s journey. It’s the first impression, the beginning of a relationship with your customers, and as such, it demands protection and legal compliance. Registering your business name fortifies your brand identity and safeguards it from being claimed by others. The process, which involves filing for Articles of Incorporation or Articles of Organization, bestows upon your business a legal standing and a sense of permanence.

This registration transcends mere formality; it’s a declaration to the world and to the District of Columbia Department of Consumer and Regulatory Affairs that your business is legitimate, serious, and here to stay. While other businesses may come and go, your registered business name stands as a testament to your presence and your promise to the marketplace.

Protecting Intellectual Property

The lifeblood of many businesses, especially startups, is the innovation and creativity they bring to the market. Securing this intellectual property (IP) is compulsory; it’s a legal requirement to protect your business from potential threats to your success. Registering trademarks, securing patents, and ensuring non-disclosure agreements are in place are all essential steps to protect your business’s unique products, services, and identity.

Enlisting the expertise of legal counsel is advisable to navigate the complexities of the U.S. Patent and Trademark Office procedures and to ensure your IP assets are properly safeguarded. With the proper protection, your trademarks and patents become intangible fortresses, preventing unauthorized use or theft that could otherwise harm your business and revenue.

Raising Capital Legally

Securing capital is a critical and challenging part of fostering a startup. However, it’s not just about securing the funds; it’s about doing it within the full scope of the law. Legal compliance when raising capital involves an intricate understanding of federal and state securities laws and ensuring that all investor agreements are airtight and legally sound.

Failure to adhere to these laws and regulations can lead to dire consequences, including financial penalties and legal issues that could jeopardize the very foundation of your business. It’s a delicate dance, one where a misstep is not an option. Thus, it is critical for startups to seek legal counsel to ensure that every penny raised is done so legally and ethically, aligning with the overarching solid business plan.

Obtaining Adequate Insurance Coverage

Uncertainty is an inevitable part of the business journey, making sufficient insurance coverage essential, not optional. Insurance acts as a safety net, protecting your business from potential risks that could otherwise lead to financial ruin. Some types of insurance coverage that are important for businesses include:

• General liability insurance, which shields your company from legal claims
• Commercial property insurance, which covers damages to your business property
• Professional liability insurance, which protects against claims of negligence or errors in professional services
• Workers’ compensation insurance, which provides coverage for employees who are injured on the job
• Cyber liability insurance, which protects against data breaches and cyber attacks

Each business insurance type serves a protective purpose and can help safeguard your business from unexpected events.

Moreover, specialized policies such as errors and omissions insurance and workers’ compensation insurance are not just about legal compliance but about ensuring that both the business and its employees are safeguarded in the event of unforeseen circumstances. It’s about peace of mind, knowing that your business can withstand the storms that may come.

Complying with Data Protection Laws

In the current digital era, data holds immense value, and its protection is a legal mandate, not just a technicality. Complying with data protection laws such as GDPR, CCPA, and numerous others is a multifaceted challenge that businesses must rise to meet. These laws are designed to safeguard consumer information, and non-compliance can result in significant financial penalties, legal repercussions, and irreparable damage to your business’s reputation.

Startups must work hand-in-hand with cybersecurity and legal professionals to weave a tapestry of legal compliance and best practices that not only protect consumer information but also the integrity of the business. It’s a commitment to upholding the trust your customers place in your business, ensuring that their data is as secure as the products or services you offer.

Establishing Internal Processes for Disputes

Conflict is unavoidable in any business, but the way it’s handled can be transformative. Establishing internal processes for disputes is about creating a culture of open communication and systematic conflict resolution. It’s about drafting clear contracts and agreements that not only protect business interests but also provide clarity in expectations and obligations, reducing the likelihood of disputes arising in the first place.

Utilizing Dispute System Design (DSD) principles and ensuring that steps such as negotiation, mediation, and, where necessary, arbitration or litigation are in place, can save your business from the drawbacks of unresolved conflicts. An effective DSD system is not just a conflict resolution mechanism; it’s a statement of your business’s commitment to fairness and respect for all parties involved.

Incorporating Sustainable Practices

Sustainability has evolved beyond a buzzword to a business requirement, indicating a company’s commitment to environmental responsibility and legal compliance. Incorporating sustainable practices into your business plan not only demonstrates corporate responsibility but can also enhance your competitive advantage. It requires staying abreast of local jurisdictional laws and may necessitate consultation with legal advisors to navigate the complexities of environmental regulations.

This dedication to sustainability often resonates with consumers and can lead to increased loyalty and trust in your brand. It’s about aligning your business with the global shift towards a more eco-conscious marketplace and ensuring that your business practices uphold these values.

Regularly Reviewing and Updating Your Business Plan

A business plan is a dynamic document that must be continuously updated to match your business’s evolution. Regularly reviewing and updating your business plan is crucial for adapting to changes in the market, business goals, and legal requirements. It’s an ongoing process of refinement and recalibration, ensuring that your strategies remain relevant and effective in the face of new challenges and opportunities.

This practice of revisitation and revision is the hallmark of a dynamic business that is responsive to the shifting economic landscape and proactive in its pursuit of success. It’s about continuously seeking improvement and ensuring that your business remains on the cutting edge of its industry.

Utilizing Local Business Development Centers and Incubators

The journey towards growth and success is better navigated with assistance. Local business development centers and incubators are treasure troves of resources, offering:

• Networking opportunities
• Connecting entrepreneurs with investors
• Providing financial assistance
• Offering valuable mentorship from experienced business professionals

These centers can be pivotal in helping small business startups flourish.

Moreover, incubators often provide startups with the following benefits:

• Physical space and facilities necessary to operate without the burden of high overhead costs
• Opportunity to focus on growing their business
• Synergy created within supportive environments that can catalyze innovation
• Foster collaborations
• Contribute to the local and broader economy.

Embarking on the entrepreneurial journey is a bold endeavor, one that requires careful planning, steadfast resolve, and meticulous attention to legal detail. From the fundamental step of crafting a solid business plan to the complexities of complying with data protection laws and establishing internal processes, each aspect of your business’s foundation must be built with precision and care. Remember, a business is more than its products or services; it’s a legal entity that must navigate the intricate web of regulations and responsibilities that come with its operation.

Let this guide be your roadmap, illuminating the path to a business built on legal fortitude and strategic acumen. Embrace the wisdom within these pages, and let it inspire you to forge a business that is not only successful but also responsible, sustainable, and primed for long-term prosperity.

Frequently Asked Questions

What are the key components of a business plan.

The key components of a business plan are the executive summary, business description, market analysis, organization and management, sales strategies, funding requirements, and financial projections. These sections are crucial for presenting a comprehensive overview of your business and its potential for success.

Why is choosing the right business structure important?

Choosing the right business structure is important because it affects tax liability, paperwork requirements, fundraising capabilities, and legal protection of personal assets. These factors have a significant impact on the success and sustainability of a business.

How often should I review and update my business plan?

It is essential to review and update your business plan regularly to adapt to changing market conditions, business goals, and legal requirements. This will help ensure your business stays competitive and aligned with its objectives.

What is the role of business development centers and incubators?

Business development centers and incubators play a crucial role in supporting startups by providing resources, mentorship, access to investors, and affordable working spaces for growth. This directly contributes to the success and sustainability of new businesses.

Why is protecting intellectual property vital for my business?

Protecting intellectual property is vital for your business as it safeguards your ideas, branding, and products from unauthorized use or theft, helping to maintain your competitive edge and revenue.

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5 Important Legal Considerations Before Starting A Business

5 Things to Consider Before Starting Any Business

Starting a new business is a thrilling journey filled with opportunities and challenges. While passion and creativity drive entrepreneurship, it’s crucial not to overlook the legal aspects that can make or break your business. Failing to address these legal considerations before starting a business can lead to costly mistakes and even jeopardize your venture’s future. In this article, we’ll dive into the five crucial legal considerations you must take into account before launching your business:

1. Business Structure

The choice of business structure is a fundamental decision that impacts various aspects of your venture, including taxation, liability, and management. Here are the key business structures to consider, along with their legal implications:

Sole Proprietorship

• Personal Liability: You have unlimited personal liability for the business’s debts and legal obligations, putting your personal assets at risk.
• Taxation: Income from the business is reported on your personal tax return, and you’re subject to self-employment taxes.
• Regulatory Compliance: Few formalities are required, but local permits and licenses may still be necessary.

Partnership

• Liability: Partners share both profits and liabilities, making each partner personally responsible for the business’s debts.
• Agreements: It’s essential to have a well-drafted partnership agreement that outlines roles, responsibilities, and dispute resolution procedures.
• Taxation: Profits are typically passed through to partners’ individual tax returns, but there are various partnership types with differing tax treatments.

Limited Liability Company (LLC)

• Limited Liability: Members’ personal assets are protected from business debts and liabilities.
• Management: Operating agreements define how the LLC is managed, and members have flexibility in structuring the management.
• Taxation: LLCs can choose their taxation method, either as a pass-through entity or as a corporation.

Corporation

• Limited Liability: Shareholders’ personal assets are generally protected from corporate debts and liabilities.
• Regulations: Corporations are subject to more complex legal and regulatory requirements, such as annual meetings, bylaws, and extensive record-keeping.
• Taxation: Corporations can be taxed as C corporations or S corporations, each with unique tax rules and implications.

Selecting the right business structure is crucial to your business’s legal foundation. Each option has distinct legal implications, and it’s advisable to consult with an attorney to ensure you choose the one that aligns with your business goals and offers the desired level of personal liability protection.

2. Permits and Licenses

Almost all businesses require various permits and licenses to operate legally. The specific requirements can vary significantly depending on your industry, location, and business activities. Here’s what you need to consider:

Federal, State, and Local Licenses:

• Different levels of government may require specific licenses or permits. Federal licenses are typically reserved for heavily regulated industries like aviation or firearms. State and local licenses are more common and may include sales tax permits, health permits, and zoning permits.

Industry-Specific Regulations

• Certain industries, such as healthcare, food services, and construction, often have additional licensing requirements. Failure to obtain these licenses can result in fines, closure, or legal action.

Compliance and Renewal

• Obtaining licenses is not a one-time task. Most licenses need to be renewed periodically, and businesses must remain in compliance with relevant regulations.

Penalties for Non-Compliance

• Operating without the necessary permits and licenses can lead to severe penalties, fines, or even the shutdown of your business. Legal repercussions can also include lawsuits from competitors or customers.

Ensuring you have all the required permits and licenses is essential for your business’s legality and credibility. Failure to comply with these legal obligations can lead to significant financial and legal consequences.

3. Intellectual Property

Intellectual property (IP) refers to creations of the mind, such as inventions, artistic works, and brand identities. Protecting your IP is crucial to maintaining a competitive edge and avoiding legal disputes. Here’s what you need to consider regarding intellectual property:

• Trademark Search: Conduct a comprehensive trademark search to ensure your chosen business name or logo does not infringe on existing trademarks.
• Registration: Register your trademarks with the United States Patent and Trademark Office (USPTO) to gain exclusive rights and legal protection.
• Enforcement: Defend your trademarks against infringement to maintain your brand’s distinctiveness.
• Automatic Protection: Copyright protection is automatic upon the creation of a work, but registration with the Copyright Office provides additional legal benefits.
• Fair Use: Understand the concept of “fair use” to avoid infringing on others’ copyrights and to protect your own works from unauthorized use.
• Patent Search: Conduct a patent search to ensure your invention is novel and not already patented.
• Patent Application: File a patent application with the USPTO to secure your invention’s exclusive rights.

Trade Secrets

• Protection Measures: Implement security measures to safeguard trade secrets and establish policies to maintain their confidentiality.
• Non-Disclosure Agreements (NDAs): Use NDAs when sharing sensitive information with employees, contractors, or partners to legally bind them to confidentiality.

Protecting your intellectual property is essential for preserving the uniqueness and value of your business. Failure to do so can result in legal disputes, loss of market share, and damage to your brand’s reputation.

4. Contracts and Agreements

Contracts and agreements are the building blocks of a successful business. Properly drafted and legally enforceable contracts can help you avoid disputes and protect your interests. Here are some key considerations:

Employment Contracts

• At-Will Employment: Clearly define whether employment is “at-will” (terminable at any time) or for a specific duration.
• Non-Compete and Non-Disclosure Clauses: Include clauses to protect your business from employees divulging sensitive information or competing against your business after leaving.

Vendor Agreements

• Payment Terms: Specify payment terms, delivery schedules, and quality standards to avoid disputes.
• Dispute Resolution: Include a dispute resolution clause specifying how conflicts will be resolved, which can help you avoid costly litigation.

Client Contracts

• Scope of Work: Clearly outline the services or products you will provide, as well as any limitations or exclusions.
• Payment and Late Fees: Define payment terms, late fees, and consequences for non-payment.

Operating Agreements

• Member Rights and Obligations: Clearly define the rights and obligations of LLC members.
• Dispute Resolution: Include provisions for resolving disputes among members.

Contracts and agreements are legally binding documents that protect your business interests and minimize the risk of disputes. Consulting with an attorney during their creation can help ensure their enforceability.

5. Tax Obligations

Navigating the complex world of taxation is vital for your business’s financial health and legal compliance. Here are key considerations regarding your tax obligations:

Business Structure and Taxation

• Sole Proprietorships and Partnerships: Business income is typically reported on individual tax returns.
• LLCs: Can choose between pass-through taxation or elect to be taxed as a corporation.
• Corporations: C corporations are subject to double taxation (profits taxed at both corporate and individual levels), while S corporations offer pass-through taxation.
• Registration: Register for a sales tax permit with the relevant state agency.
• Compliance: Ensure accurate collection and remittance of sales tax to avoid penalties and audits.

Employment Taxes

• Tax Withholding: Ensure proper withholding of taxes from employee paychecks.
• Quarterly Reporting: Submit payroll tax reports and payments on time to avoid penalties.

Federal, State, and Local Taxes

• Filing and Payment Deadlines: Understand and meet all tax filing and payment deadlines.
• Record-Keeping: Maintain thorough records to support your tax filings and deductions.

Complying with tax regulations is a legal obligation that every business must fulfill. Failing to do so can result in penalties, fines, audits, and legal actions by tax authorities.

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Minimizing liability for your business: legal areas to consider.

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Whether you’re starting a business or you’ve been at it for a while, liability and risk are facts of your life. Keeping those risks to a minimum is a never-ending endeavor that requires constant vigilance and effort. Here, we’ll look at the legal areas to consider when you're minimizing liability for your enterprise.

Potential Areas Of Risk In A Business

Liability takes numerous forms ranging from risks with customers and employees to regulations and market conditions. Some of the most common risk areas businesses face include:

While you want to offer your customers the best service possible, your relationship with them can turn sour in many ways, including those that involve legal matters. These can take various forms, including information protection and privacy, misinformation (false advertising), and even civil lawsuits for personal injury.

Employees can also pose a legal risk. Making sure you hire people who are right for your enterprise is key, but so too is avoiding issues with discrimination, unlawful termination, workplace safety and so forth.

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Market Conditions

Market conditions often present a great deal of financial risk to companies, but there are some legal considerations here too. The simplest form these could take is if current conditions limit your ability to deliver on promises and pay back investors. Keeping up with these responsibilities may be difficult if the market swings the wrong way.

Real Property And Leases

Whether you’re renting it, selling it or using it to conduct business, real estate is rife with liabilities. You typically owe a duty of care to those who visit a property you own, and if someone gets injured, it can be costly for your business. Purchases and leases can be risky in that they can have numerous uncertainties, moving parts and regulations.

Executives And Leadership

Senior executives and leaders have numerous legal duties . Accountability is a major factor here, particularly where finances are concerned. Upholding ethics and complying with regulations is also important for minimizing liability.

Business Partners

Relationships with other companies are frequently a source of risk. Liability could stem from disputes over agreements, failure to deliver on promises or even perceived slights. Knowing how to prevent these disputes — and resolving them as elegantly as possible when they do arise — is vital to effective risk management.

Tax liability is an ever-present matter for most businesses. As important as it is to keep your tax exposure down, it’s more important to stay within the bounds of the law when doing so. Knowing how your organization fits within the tax code is vital to sustaining profitability.

Best Practices For Minimizing Business Liability

When you're striving to keep your risk down, there's a wide range of best practices to implement. The following tips are just a few ways to minimize liability for your organization, whether you’re a small family business or a large corporation.

Treating Legal Counsel As A Business Partner

First, make sure you don’t try to do it all by yourself. Get legal counsel, either in-house or through an outside law firm, and treat them as a business partner. Involve them in the numerous decision-making processes that are part of running your company, whether you’re developing and revising policies or navigating a dispute. They can provide insight into the legal implications of everything you do.

Choosing The Right Corporate Structure

Choosing the right corporate structure is key to minimizing liability for both your business and your stakeholders. An LLC provides liability protection for its members, as do S- and C-corporations , but only within certain limits. In addition, your corporate structure could impact other legal areas, such as what regulations pertain to you or how you are taxed. Carefully consider all of these items when choosing an entity type for your business.

Taking A Legal Inventory And Identifying Areas Of Risk

To safeguard yourself against lawsuits and other legal risks, you should take stock of where you’re strong and vulnerable. With the assistance of your legal counsel, take a careful, thorough inventory of your current legal standing, and identify areas of risk. Your inventory should take laws, practices, ethics, environmental matters and even your current marketplace climate into consideration.

Reviewing Policies And Practices

With areas of risk in mind, review your policies and practices and make improvements where needed. Your policies should support compliance with all pertinent regulations, but that won’t accomplish much if your current practices and corporate culture fail to do the same. Find ways to bring both in line with all relevant legal standards and best practices.

Solidifying Business Contracts

Business contracts are complex agreements with many moving parts. They're all worth reviewing on a routine basis, particularly if you notice that some business relationships are becoming less profitable. As your business develops, your contracts will often need to change. In addition, if there are any weak points in your agreements, you should address and renegotiate those when necessary.

Incorporating An Alternative Dispute Resolution (ADR) Mindset Into Your Culture

Your relationships with business partners and other entities may be at risk if a conflict arises. One of the best practices for keeping these risks to a minimum is to adopt an ADR mindset in your corporate culture. Too often, businesses will lose massive amounts of revenue by trying to “make the other guy pay” when they could have reached a mutually beneficial resolution instead.

Getting Insurance

Naturally, insurance is vital, particularly when you have operations that pose high amounts of risk to employees, customers, business partners and so forth. If you're not fully insured, consider changing that immediately.

Minimizing Liability — Never “One and Done”

The most important item to remember when it comes to minimizing liability for your business is that it’s never a one-and-done endeavor. Continuous improvement is key, so you should keep revisiting your policies and practices on a routine basis.

The information provided here is not legal advice and does not purport to be a substitute for the advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.

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Legal Considerations for Starting a New Business

Develop a business plan. Your business plan is a roadmap for your business that provides both you and your financial backers with key information as to what your business is going to do and how it will operate. Your business plan is a work in progress that should evolve over time and be influenced by outside factors such as the economy. Numerous resources are available to assist you in thinking through and developing your plan, such as the Small Business Administration website, www.sba.gov.

Determine the legal structure of your business. The form of your organization will determine whether you, the business owner, will be personally responsible for its debts and obligations. Corporations, limited liability companies, limited partnerships and other types of limited liability entities all protect owners from obligations they have not personally guaranteed. On the other hand, sole proprietors and partners in general partnerships are personally responsible for the debts and obligations of the business. In addition, the form of entity will determine how earnings of the business will be taxed. For example, C corporations are taxed at the entity level and the owners (shareholders) are taxed again on dividends they receive from the corporation. S corporations, limited liability companies and limited partnership are not subject to entity-level tax. Income from the organization is “passed through” and taxed to the owners individually.

Understanding taxes. Your business will be subject to taxes such as income, employment, and sales taxes. Proper tax planning on a regular basis is necessary to assure proper deposits of employment and income taxes at the federal and state levels. To report and pay taxes, your business will likely need a federal and state employer tax identification number. Resources to find out more about what taxes you are subject to and when and how to pay them are available from the IRS, www.irs.gov, and Colorado Department of Revenue, www.colorado.gov/revenue. In Colorado, employers are required to carry workers compensation insurance on their employees. Information on workers compensation can be found at Colorado Department of Labor and Employment.

Select your business name. Check to see if the business name you have selected is available for use. Most business organizations are required to register with the Secretary of State of the state in which they business is located. In Colorado, you can search the business name on-line at the Business Division of the Colorado Secretary of State at www.sos.state.co.us. If you plan to use a name other than the formal legal name of the business you must file a trade name affidavit, or fictitious name affidavit, with the Secretary of State’s Office. The business name should be used on all contracts, government forms, and applications and permits. Depending on how your business name is used in the marketplace, it may be advisable to seek federal trademark protection.

Protect your trademarks. Search the availability of any trademark you want to use in connection with your products or services. Trademark rights are acquired through usage and need not be registered to be enforceable. Registration, particularly federal trademark protection, carries with it enhanced rights for the trademark owner and thus is often desirable if the business’ products or services will be sold regionally or nationwide. Availability must be searched in a number of places including the United States Patent and Trademark Office, state trademark registries (typically searched through a secretary of state’s office), the Internet and relevant trade publications and the like. You may hire search services to perform searching. The assistance of a trademark attorney may be desirable in seeking to federally register a trademark.

Memorialize your relationships with other shareholders/members/partners. If you plan to own your business with others, work out the details of the relationship and record them in a written agreement. An LLC operating agreement typically sets forth the rights and obligations of the LLC members (including exit rights) and ideally should be negotiated and executed prior to starting to conduct business. In the corporate context, shareholders will want to work out a shareholders agreement or buy-sell agreement. The assistance of a lawyer can be beneficial during this process.

Contracts: Don’t sign on the dotted line until you understand what you are agreeing to. Read and understand contracts before signing them. If you don’t understand the contract, seek guidance. If your business is an entity such as corporation or LLC, be sure to sign the contract in your capacity as an officer or manager of the entity, so as to ensure the obligation is one of the entity and yours personally. For example, ABC Company, By John Doe, President.

Capitalization and access to capital. Capital includes both debt and equity. Equity is raised by sale of the business ownership interest, such as a share of stock in a corporation or a membership interest in an LLC. Equity does not require repayment. Debt is typically evidenced by a promissory note under which the debt accrues interest and which must be repaid at the maturity date. You should seek to establish banking and or other financial arrangements early on. If you plan to raise capital from investors, you will need the advice of a securities attorney who can guide you on compliance with federal and state securities law.

Permits and Licenses. Depending on the type of business you plan to engage in, you may need permits and licenses. At a minimum, you will need a business license. In Colorado, a business license may be obtained from the Colorado Department of Revenue, www.colorado.gov/revenue or at www.colorado.gov .

11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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March 19, 2021 > Cyprus > Corporate and Commercial

CHAMBERSFIELD ECONOMIDES KRANOS | View firm profile

The disruptive force of the Covid-19 Pandemic has disturbed the balance of all businesses’ operations and changed the way people think and act. Today’s world strives to adapt to continue functioning, retain economic stability and society’s welfare.  

In this new reality, businesses are in a high anxiety state and undertake intensive actions to secure their staff and retain business relations with clients, shareholders, stakeholders, and partners.

Even though the crisis is critically affecting our way of life, there are intricate business alerts that entrepreneurs should not neglect and seek ASAP the assistance of professional legal advisors and consultants to confront them successfully.

Business Alerts

Business endurance.

Businesses should form an effective business continuity plan with strategies that target the  business’s continuation .

Professional legal assistance is needed when forming the business continuity plan to safeguard that the business fully complies with the legislative framework, i.e.:

• contractual relationships
• employment contracts
• compliance of the industry with its obligations before governmental authorities
• business relationships of company’s affairs with employees, clients, suppliers, shareholders, and stakeholders.

Business Insurance Coverage

In today’s business environment, many companies have business insurance coverage plans.

Consequently, the company’s legal advisors should thoroughly examine the insurance policies and coverages to identify if compensations for the COVID – 19 pandemic exist.

It is noteworthy to mention that all insurance contacts are subject to high variations when coverage policies and exemptions are concerned.  Chambersfield Economides Kranos lawyers can evaluate your business insurance contract and identify possible coverages according to the contractual and related pandemic litigation, as well as determine the coverage percentage of the cause.

Employment Law

Almost all the governments of the world, during the pandemic outbreak, issued supportive measures and degrees to safeguard business operations, social welfare and prevent mass layoffs.

Moreover, governments issued a safety and security degree for tackling the pandemic effects and provide a healthy, hazard-free workplace environment to all employees.

Despite the government’s efforts, many people have wrongly or unfairly being dismissed from their employment. Unfortunately, many of them were unaware of legislative and/or regulatory provisions aiming to safeguard their legal rights.

An unlawful employment dismissal depends on the individual situation and may violate the Termination of Employment Law, Violation of Constitutional Human Rights, or Breach of Employment Contract.

Subsequently, before proceeding with employment termination, businesses should consult their legal advisors to determine if there is a violation of employment rights.

Privacy and Security

There are many questions concerning network privacy and security on remote work, especially today that social distancing is promoted as a prevention measure of Covid-19 pandemic spread.

Due to pandemic measures, “business as usual” is disrupted, and the vast majority of companies proceeded with the introduction of remote work to maintain their sustainability.

At the same time, the implementation of “working from home” raised safety questions to companies regarding:

• The disclosure of sensitive data processed or saved in the company’s systems,
• Possible unauthorized access or disclosure of data,
• Unsecured Networks that are vulnerable to viruses, malware, etc.

Consequently, companies, to overcome those problems should assess their policies:

• of remote access in their systems and develop regular risk checks,
• adopt continuous monitor techniques,
• and enhance employees’ security access points by implementing double system authentication techniques and encryptions.

Besides, special attention should be given to employees’ training and system defense mechanisms to prevent spear phishing, whaling, smishing, and vishing that flourish during a crisis.

Concurrently, companies should define their policies for gathering and receiving health-related information about their visitors, employees, and third parties to be fully compliant with the EU General Data Protection Regulations (GDPR).

The needs of each company vary according to the nature of the business operations and activities.  For privacy matters and  GDPR  compliance, it is highly recommended to seek the advice of the professional lawyers of Chambersfield Economides Kranos.

It is noteworthy to mention that companies that do not implement the appropriate measures may face sudden threats and consequences.

Contractual Relationships

The coronavirus pandemic has undeniably affected the world economy and created massive negative impacts on all commercial contacts and activities.  Countless trade contracts were affected, and many business transactions were canceled or postponed.

Also, concerning contractual relationships, the pandemic has raised reasonable questions of who will be accountable and bear the financial losses of not meeting the contract obligations.

Additionally, a wise confrontation should be the implementation of crisis management strategies that will help in minimizing the effects of the outbreak i.e.

• Negotiation attempts will involve parties with suggestions that may solve the problem.
• Implementation of relief strategies
• Formation of a Contingency plan
• Legal risk analysis
• Revision of contract clauses
• Governing law, etc.

It is also highly recommended for overcoming contractual relationship vulnerability to seek the consultation of Chambersfield Economides Kranos, legal and business consultants.

The firm’s legal consultants can help form a crisis management plan, which will contain actions that will safeguard your firm’s contractual relationships and business operations.

Financial Concerns

Many companies and individuals have experienced financial distress for their earnings, cash flow, and loans after the pandemic outburst.

Also, many companies had to appeal for restructuring their contracts and agreements to cope with the pandemic consequences and continue their business operations.

The answer to business sustainability does not lie only with loan restructuring but with overall business restructuring due to Covid-19 unpredictable era effects.

Thereupon, for a successful restructuring of your business, entrepreneurs should appoint legal experts that will perform a thorough analysis of the company’s current situation and propose sustainably solutions.

Merges and Acquisitions

As previously stated, the Covid-19 pandemic has had a significant negative impact on all business activities, not only in nearly every sector of the economy but also on Mergers and Acquisitions transactions.

Many M&A transactions after the outbreak were affected in terms of:

• Financial Risk – due to future uncertainties on the behavior of the economy, in M&A transactions, entrepreneurs have shown hesitation on whether they will proceed with the transaction, cancel, or postpone it.
• Value – The conditions of the international market have changed dramatically.

Nowadays, we observe spontaneous economic tendencies. Therefore,  entrepreneurs are in the process of re-evaluating M&A pricing and risks before reaching a decision.  Also, in M&A re-evaluation, a great emphasis is being given on financial due diligence indicators, i.e., capital funding, continuity business plans, risk management, etc.

• Sustainability – entrepreneurs evaluate possible business sustainability scenarios before proceeding with the M & A transaction.

Additionally, entrepreneurs attempt to identify policies that will ensure the successful continuation of their business operations and mitigate the risks of market fluctuations.

With that said, today’s entrepreneurs are in more need of cooperation with lawyers that have great experience in cross-border transactions, M & A, and crisis management.

Intellectual Property Rights

Intellectual Property Rights have been highlighted even more during the pandemic era.

Subsequently, businesses should find “out-of-the-box” solutions to cope with the pandemic’s effects, which will sustain their operations and create new opportunities.

Several examples demonstrate this thinking in e-commerce, IT, pharmaceutical, etc.

For example, many IT companies seized the opportunity of social distancing and lockdowns and focused on technological developments.  It is a fact that the Research and Development department of Pharmaceutical companies got into the fight for developing vaccinations of immunity towards the coronavirus.

All new developments need to be assessed by the governmental authorities, register their IP rights, and acquire the license before entering the market.

The measures of the governmental authorities, as expected, created delays in the registration process of copyrights, trademarks, and patents.

Therefore, to avoid further procedure delays, it is highly recommended for your IP application and procedure be handled by experienced and accredited law firms.  The professional IP lawyers can provide the appropriate advice during the process, on a national and international level, and overcome any possible delays during the application stage.

Nowadays, e-commerce is deemed to be the leader of the retail industry. Movement restrictions, lockdowns, and social distancing were the main reasons that contribute to the e-commerce booming induced. As expected, companies that adapted fast to consumer behavior changes thrived.

It is undeniable when it comes to e-commerce, it is of utmost importance to be sure that your online business is compliant with the relevant regulatory and legislative framework.

Several laws pertain specifically and related to online businesses, including but not limited to intellectual property rights (trademarks, copyrights, etc.), privacy policies, terms of service, data protection, and consumer rights.

Therefore, for safeguarding your online business operations, it is recommended to search legal consultants’ advice and seek their assistance with all legal aspects related to online businesses’ formation and function.

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35 Legal Mistakes Every Startup and Growing Business Must Avoid

Will your business idea succeed? Take our quiz - completely confidential and free!

Are you starting a business or expanding one? Legal mistakes can trip you up.

With three decades of legal and startup experience across various business sizes, I’ve seen it all. Dive into this guide to uncover the 35 most critical legal errors and how to avoid them.

Startup legal mistakes:

• Not formally setting up a business entity
• Overlooking vital organizational documents
• Overlooking securities laws when onboarding investors
• Ignoring non-compete clauses in founders and employees agreements
• Overlooking strong employment/options agreements
• Skipping professional legal advice
• Skipping written agreements
• Neglecting intellectual property rights
• Misunderstanding employment laws
• Overlooking online business regulations
• Failing to secure proper licenses and permits
• Neglecting to draft a solid business plan
• Mixing personal and business finances
• Overlooking customer contracts and warranties
• Not planning for potential business disputes
• Ignoring data protection and privacy laws
• Undervaluing products or services
• Failing to anticipate scaling needs
• Not investing in employee training and development
• Neglecting online presence in an increasingly digital world

1. Not formally setting up a business entity

Starting a business without a proper legal business structure exposes entrepreneurs to personal liabilities. Business structures, like LLCs or corporations , offer protection.

Why this is important

Without a formal business entity, there’s no separation between business and personal finances. This means personal assets, like homes and savings, are at risk.

For example, an e-commerce platform selling customized t-shirts doesn’t register as an LLC. When they face a copyright infringement claim, the owner’s personal assets are on the line. Or let’s say a person opens a local diner without registering it as a business. If there’s a food poisoning claim, their personal property could be seized to cover damages.

Risks: Personal financial ruin, loss of assets, and complicated tax situations.

Three tips to avoid this mistake:

• Always research the best type of business entity for your operation.
• Consult with legal experts before setting up your business.
• Regularly review your business structure as your company evolves.

Key insight:

Pick the right business structure from the start. It keeps you safe and helps your business do well.

Hire an expert to form your company and save time. Our trusted partners can help: Northwest ($39 + state fee) or Bizee ($199 + state fee) . We recommend Northwest. After evaluating the leading registration companies, Northwest stands out as our top choice due to its competitive pricing, exceptional customer support, and commitment to privacy. Pay just $39 + state fees and you'll get a free year of registered agent service, articles of organization, privacy, and client support from local experts.

Want a video rundown of some big mistakes in this article? Watch below as I highlight ten serious legal errors business owners often make and how to avoid them.

2. Overlooking vital organizational documents

Starting a business involves more than just picking a structure; the documents make it official.

For example, let’s say a digital marketing agency sets itself up as an LLC but doesn’t maintain an Operating Agreement. When a dispute arises between partners, there’s no clear protocol for resolving it. Or if a local bakery is established as a corporation but neglects bylaws, when they want to bring in new shareholders, confusion ensues.

Without the correct documentation, you may face challenges that question the legitimacy and legality of your operations.

Risks: Loss of credibility, potential legal actions, and operational inconsistencies.

• Consult a legal expert when deciding on a business structure.
• Regularly update organizational documents as your business evolves.
• Conduct annual reviews to ensure compliance with all required formalities.

Good documentation is essential for a credible business. It's more than paperwork; it's your guide to success.

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3. Overlooking securities laws when onboarding investors

Investors want returns, but you have to keep things legal.

If an e-commerce startup accepts a large sum from an investor without proper documentation, it can lead to a lawsuit when profits don’t materialize. If a local gym takes in investment to expand but overlooks securities laws, it can face penalties that strain its finances.

Skipping due diligence can land you in legal hot water, damaging trust and potentially halting operations.

Risks: Legal action, loss of investor trust, and significant financial penalties.

• Always draft clear investment documents.
• Seek legal advice when bringing in new investors.
• Keep abreast of changes in securities laws.

Clear, legal investments are vital. Don't let mistakes hinder your growth.

4. Ignoring non-compete clauses in founders’ and employees’ agreements

Non-compete clauses can bind you and your hires. Ignoring them can cost you.

For example, if a tech startup hires a developer, not realizing his prior non-compete clause prevents him from working on similar projects, this can lead to legal conflicts. If a local restaurant brings in a chef from a competitor, but her previous employment agreement prevents her from working within a certain radius, this jeopardizes the restaurant’s operation.

You risk legal battles and potential loss of business secrets.

Risks: Lawsuits, loss of competitive edge, and damaged reputation.

•  Always review the employment agreements of potential hires.
•  Discuss non-compete clauses transparently during hiring.
• Seek legal advice if uncertain about any clauses.

Hire with caution to avoid legal problems later. Know the legal ties of each person you bring on board.

5. Overlooking strong employment/options agreements

Just hiring isn’t enough; you need clear terms from the get-go.

For example, if a SaaS company offers stock options without a clear agreement, this can lead to disputes during a buyout. If a retail store doesn’t offer clear employment terms, it can result in high turnover and training costs.

Ambiguity can lead to disputes, dissatisfaction, and loss of talent.

Risks: Employee turnover , legal disputes, and potential financial liabilities.

• Always have written agreements, even with early employees.
• Review and update agreements as company policies change.
• Regularly consult legal counsel to ensure agreements are up-to-date and enforceable.

Setting clear terms upfront fosters lasting employee bonds. Beyond legalities, it's about clear communication and shared understanding.

6. Skipping professional legal advice

Legal DIYs (do-it-yourself) can seem cost-effective, but they often lead to expensive oversights.

For example, assume a dropshipping website uses a generic privacy policy from the web. They can face a lawsuit for non-compliance with specific regional data protection laws. If a local coffee shop uses an online lease template, they might not realize it lacks clauses specific to its location, resulting in unexpected eviction.

You might miss nuances, leading to non-compliant operations or vulnerabilities.

Risks: Legal disputes, operational shutdowns, and loss of credibility.

• Always consult with a legal professional for critical documents.
• Avoid generic online templates; they may not cater to your specific needs.
• Allocate a budget for legal expenses; view it as an investment, not a cost.

Seeking professional legal guidance is key. Shortcuts today might mean big expenses tomorrow. Stay protected by staying knowledgeable.

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7. Skipping written agreements

Depending solely on verbal commitments is a recipe for disputes. Written agreements ensure clarity and legal enforceability.

Without written evidence, disagreements can spiral, leading to lost time and money and strained relationships.

For example, if a digital marketing firm hires freelancers based on verbal agreements, there’s no contract to resolve disputes if and when payment disputes arise. Similarly, if a gym owner orally agrees on equipment rental rates, they risk price increases. When their supplier later increases rates unexpectedly, it leads to unexpected overheads.

Risks: Legal disputes, monetary losses, and jeopardized business relationships.

• Always insist on written contracts, regardless of the relationship’s nature.
• Ensure contracts are clear and detailed and cover all potential issues.
• Periodically review and update contracts as business needs change.

A handshake might feel right, but a written agreement ensures clarity, trust, and legal protection.

8. Neglecting intellectual property rights

Intellectual property (IP) is a valuable asset for businesses. Not securing IP rights can lead to losing unique brand identifiers and innovations.

Ignoring IP rights leaves your business vulnerable to copycats, diluting your brand’s value and market position .

For example, assume a tech startup develops a unique software tool but fails to patent it. A competitor releases a similar tool, eating into their market share. Being first won’t deter competitors. Or let’s say a coffee shop with a distinct logo and branding doesn’t trademark it. Another cafe opens up nearby with a suspiciously similar logo, causing customer confusion.

Risks: Loss of unique branding , unauthorized use of innovations, and potential legal battles.

• Familiarize yourself with IP rights: trademarks, patents, copyrights , and trade secrets.
• Seek legal counsel to protect your IP assets properly.
• Monitor the market for potential infringements and act swiftly if they occur.

Your IP defines your brand and creations. Guard it to keep your market spot unique and fend off copycats.

9. Misunderstanding employment laws

As your business grows, it’s crucial to understand employment laws to ensure fair treatment of employees and avoid legal pitfalls.

Let’s say an online magazine misclassifies its writers as contractors instead of employees, avoiding benefits. They can later face penalties for not adhering to labor laws. Or a brick-and-mortar bookstore fails to provide overtime pay for its staff, leading to a worker-initiated lawsuit.

Incorrectly classifying or treating employees can lead to lawsuits, fines, and damage to your brand’s reputation.

Risks: Financial penalties, legal actions, and negative public relations.

• Stay updated with local and federal employment laws.
• Regularly review employment contracts and practices for compliance.
• Train HR teams and managers on proper employee treatment and rights.

Fair and legal treatment of employees isn't just ethical—it's crucial for the smooth operation and reputation of your business.

10. Overlooking online business regulations

Digital spaces have their own rules. Missing them can cost you in fines and trust.

Non-compliance can result in shutdowns, penalties, and a tarnished brand reputation.

Let’s say an e-commerce platform fails to have a GDPR-compliant privacy policy. This can result in hefty fines from European regulators. Or, if a restaurant offering online delivery doesn’t adhere to digital payment standards, this can lead to a massive data breach.

Risks: Legal actions, loss of customer data, and financial penalties.

• Stay informed about digital laws relevant to your industry.
• Regularly update online platforms to ensure security and compliance.
• Seek expert advice on digital regulations, especially if operating internationally.

The online world has its own rules. Follow them to run smoothly and keep customers happy.

11. Failing to secure proper licenses and permits

Every business requires certain licenses and permits to operate legally. Overlooking this essential step can halt your operations.

Operating without the necessary permits exposes your business to fines, shutdowns, and legal scrutiny.

For example, let’s say an online streaming service doesn’t secure the appropriate licenses for broadcasting content in certain regions. This can result in legal action from regional authorities. Or, assume a local craft brewery neglects to renew its liquor license. This can lead to temporary closure and financial losses.

Risks: Closure of business, legal actions, and significant fines.

• Research all required licenses and permits specific to your industry and location.
• Schedule regular checks to ensure timely renewals.
• Consider hiring a legal consultant to guide you through the licensing process.

Licenses and permits let your business run. Stay on top of them for steady operations and to avoid legal troubles.

12. Neglecting to draft a solid business plan

A business plan acts as a roadmap for your venture. Starting without one is like navigating unfamiliar terrain without a guide.

Let’s say an aspiring influencer launches a platform without a clear monetization strategy. This can result in inconsistent revenue streams. Or, assume a person opens a boutique in an area without researching the target audience . This can lead to low foot traffic and eventual closure.

Lack of direction can lead to misused resources, missed opportunities, and business failure.

Risks: Financial losses, inability to secure investments, and haphazard decision-making.

• Spend time crafting a detailed business plan that outlines your vision, goals, and strategy.
• Review and adjust your plan as market conditions and business needs change.
• Seek feedback from mentors, peers, or professionals on your business plan and follow business plan tips .

A solid business plan is the backbone of a successful venture, guiding every decision and strategy.

13. Mixing personal and business finances

Keeping business and personal finances separate is crucial for clear financial tracking and legal protection.

For example, a freelance web developer uses a single account for personal and client payments. This makes it hard to track business expenses for tax deductions . Or, assume a bakery owner pays for personal groceries and baking supplies from the same account. This leads to inaccurate financial statements.

Muddled finances can lead to accounting nightmares, tax complications, and personal liability issues.

Risks: Personal financial liability, tax penalties, and audit complications.

• Set up dedicated business bank accounts and credit cards from the outset.
• Maintain meticulous financial records for all business transactions.
• Regularly reconcile and audit your business finances.

Separating business and personal finances isn't just smart accounting—it's essential for legal protection and clarity.

14. Overlooking customer contracts and warranties

Contracts and warranties set clear expectations with customers. Ignoring them can result in disputes and damage to your brand reputation.

For example, assume an online electronics store doesn’t offer clear warranty terms. This can lead to backlash when products malfunction. Or, assume a furniture store neglects to detail return and exchange policies. This can create disputes when customers try to return items.

Ambiguous terms or lack of clear policies can lead to customer dissatisfaction and legal challenges.

Risks: Legal disputes, negative reviews, and potential loss of customers.

• Draft clear, fair contracts and warranties for your products or services.
• Display your policies prominently and ensure customers acknowledge them.
• Periodically review and update terms based on feedback and industry standards.

Transparent customer agreements build trust. Set them up and uphold them for lasting loyalty and fewer disputes.

15. Not planning for potential business disputes

Business disputes, both internal and external, are inevitable. Failing to anticipate them can leave you unprepared.

For example, let’s assume two co-founders of a digital marketing agency disagree on business direction. Without a prior agreement, this can lead to a paralyzing standoff. Or, assume a spa enters a verbal agreement with a supplier. When the supplier fails to deliver, the spa has no legal recourse.

Unexpected disputes can drain resources, time, and focus from your primary business goals.

Risks: Lengthy legal battles, financial strain, and damage to business relationships.

• Draft clear dispute resolution clauses in all contracts and agreements .
• Consider mediation or arbitration as first steps before heading to court.
• Always document communications and transactions to provide a clear record.

Disputes happen in business. Clear processes and paperwork can make settling them easier and less hassle.

16. Ignoring data protection and privacy laws

It’s essential to protect personal data. Non-compliance with data protection laws can erode trust and attract hefty fines.

For example, let’s say an e-commerce site stores customer credit card information without proper encryption. This can lead to a massive data breach. Or, assume a medical clinic doesn’t secure patient records properly. This can result in unauthorized access and compromising patient confidentiality.

Failing to safeguard customer data can lead to breaches, tarnishing your brand’s reputation and incurring legal penalties.

Risks: Financial penalties, loss of customer trust, and potential legal actions.

• Stay updated with data protection regulations specific to your industry and location.
• Implement robust cybersecurity measures to safeguard customer data.
• Educate your team about the importance of data privacy and ensure compliance at all levels.

Data privacy isn't just about compliance—it's a promise to your customers. Keep it top of mind to build trust and secure your business's future.

17. Undervaluing products or services

Setting the right price for your offerings is a balance. Undervaluing them can hurt profitability and undermine perceived value.

For example, assume an online course creator prices a high-quality course too low. This can result in earning less than competitors and attracting bargain-seeking, non-committed students. Or, assume a gourmet cafe prices its artisanal coffees similarly to a fast-food chain. The result is that the cafe could fail to cover costs and miss its target audience.

Low pricing can lead to unsustainable profit margins and position your brand as ‘cheap’ in the market.

Risks: Lowered profitability, brand devaluation, and potential business unsustainability.

• Conduct thorough market research to understand your value proposition and competition.
• Reevaluate pricing strategies regularly to align with costs and customer expectations.
• Test different price points and monitor feedback and sales data.

Price reflects value. Ensure your pricing strategy communicates the true worth of your offerings and supports business growth.

18. Failing to anticipate scaling needs

Every entrepreneur dreams of business growth. However, not planning for scaling can cause operational hiccups.

Without a clear scaling strategy, rapid growth can overwhelm systems, processes, and teams.

For example, assume a SaaS platform experiences sudden user growth but hasn’t planned server scaling. This can lead to downtime and user dissatisfaction. Or, let’s say a popular artisanal bakery struggles to meet demand due to limited production capacity. This can lead to long customer wait times and missed sales opportunities.

Risks: Operational breakdowns, decreased customer satisfaction, and potential business stagnation.

• Periodically review business processes for scalability.
• Invest in systems and training that support growth.
• Plan financial strategies to fund scaling needs when the time comes.

Growth is exciting, but without preparation, it can become a business's downfall. Plan to ensure smooth transitions as your business expands.

19. Not investing in employee training and development

Your team is the backbone of your business . Neglecting their growth can lead to stagnation and high turnover.

For example, let’s say an e-commerce company doesn’t train its customer support team on new products. This can lead to incorrect information being shared and dissatisfied customers. Or, assume a retail store neglects to provide sales training for its staff. This can result in missed upsell opportunities and inconsistent customer experiences.

An undertrained team can result in inefficiencies, mistakes, and low morale.

Risks: Decreased productivity, higher turnover rates, and potential damage to business reputation.

• Allocate a portion of your budget for regular training and development programs.
• Encourage feedback from employees on their training needs and aspirations.
• Keep abreast of industry trends and ensure your team is equipped to adapt.

Investing in your team's growth translates to business growth. Ensure they have the skills and knowledge needed to drive success.

20. Neglecting online presence in an increasingly digital world

An online presence is no longer optional. Failing to establish and maintain one can leave significant opportunities on the table.

For example, if a digital consultant doesn’t update their website or portfolio, it leads to fewer client inquiries. Or,  if a local gym doesn’t have an online booking system or active social media, this can result in potential members choosing more tech-savvy competitors.

An absent or outdated online presence can result in missed customer engagements, lower visibility, and decreased trust.

Risks: Loss of potential customers, weakened market position, and diminished brand credibility.

• Prioritize building and regularly updating a professional website.
• Engage with customers on relevant social media platforms.
• Stay informed about digital trends and customer online behaviors.

Being online is essential for business. Use it to reach customers, earn their trust, and grow.

Having navigated the initial challenges of starting a business, the growth phase presents different legal hurdles.

As your business expands, so does the complexity of maintaining compliance and protecting your interests. In this next section, we examine common legal mistakes made during the growth phase and how to avoid them.

Growth-phase legal mistakes:

• Overextending financially without legal protection
• Expanding internationally without local legal research
• Overlooking intellectual property rights during scaling
• Not revisiting employment contracts and policies
• Neglecting customer feedback on legal agreements
• Failing to update business structure with growth
• Neglecting data protection and privacy regulations
• Inadequate crisis management planning
• Overlooking key regulatory changes
• Ignoring ethical considerations in business decisions
• Not regularly reviewing contracts and agreements
• Failing to protect intellectual property
• Mismanaging employees
• Inefficient debt management
• Neglecting exit strategy planning

1. Overextending financially without legal protection

Expansion requires capital. However, overextending without proper legal safeguards can lead to catastrophic outcomes.

For example, if an online fashion retailer borrows heavily to launch a new clothing line without understanding loan terms, this can lead to a debt spiral. Or, if a restaurant chain expands rapidly using high-interest loans, this can lead to financial strain and eventual closures.

Borrowing or investing without clarity can entangle a business in unmanageable debts or unfavorable terms.

Risks: Bankruptcy, loss of business assets, and unfavorable loan terms.

• Seek legal advice before signing financial agreements.
• Understand the full implications of loans, partnerships, and investments.
• Maintain a well-structured financial plan and revisit it regularly.

Smart money choices and legal planning lead to steady growth.

2. Expanding internationally without local legal research

Global expansion is thrilling, but every country has unique legal rules.

For example, assume a digital marketing platform doesn’t adapt to EU data protection laws. This can result in hefty GDPR fines. Or, say, an American coffee chain opens outlets in India without understanding local licensing norms. This can lead to temporary shutdowns.

Ignorance of local laws can result in violations, fines, and business disruptions.

Risks: Legal penalties, damage to brand reputation, and operational disruptions.

• Invest in local legal expertise when expanding to new territories.
• Ensure compliance with local employment, taxation, and business laws.
• Regularly review and adapt to changing international regulations.

Follow local laws for smooth business operations abroad.

3. Overlooking intellectual property rights during scaling

As you grow, the potential for infringing on others’ intellectual property (IP) rights or infringing your IP increases.

For example, assume a SaaS company inadvertently uses patented technology. This can lead to legal disputes and compensation. Or, let’s say a cosmetic brand expands its product line, unintentionally copying a competitor’s product design. This can lead to litigation.

IP disputes can be expensive, time-consuming, and damaging to a brand.

Risks: Legal battles, financial compensation, and loss of business assets.

• Conduct regular IP audits as the business expands.
• Invest in legal advice for IP protection and infringement checks.
• Educate teams about the importance of IP rights.

Protecting IP rights is key for steady growth.

4. Not revisiting employment contracts and policies

As businesses grow, their human resource needs evolve, necessitating updates in employment terms.

For example, assume an e-commerce platform, after rapid scaling, neglects to update non-compete clauses. This can lead to key personnel joining competitors. Or, if a retail chain doesn’t update its overtime policies, this can lead to employee disputes and legal challenges.

Outdated employment contracts can lead to employee dissatisfaction, legal disputes, and non-compliance issues.

Risks: Employee lawsuits, penalties for regulatory non-compliance, and high turnover rates.

• Regularly review and update employment contracts and HR policies.
• Stay informed about changing labor laws and industry standards.
• Seek feedback from employees to ensure policies align with their needs and expectations.

Updating job terms keeps workers happy and reduces legal issues.

5. Neglecting customer feedback on legal agreements

As businesses scale, customer agreements often become lengthy and complex, which can alienate clients.

For example, if a cloud storage service updates its terms of service without clarity, it leads to user confusion and backlash. Or, if a gym chain introduces a new membership agreement that’s dense and favors the business excessively, this can lead to member drop-offs.

Overly complicated or one-sided agreements can deter customers and lead to disputes.

Risks: Loss of customer trust, reduced sales, and potential legal battles.

• Ensure legal agreements are clear, concise, and fair.
• Solicit customer feedback when revising terms and conditions.
• Regularly review agreements to ensure they align with industry best practices.

Clear and honest contracts build customer trust and loyalty.

6. Failing to update business structure with growth

As a business grows, its initial legal structure may no longer be optimal, potentially exposing the enterprise to risks.

For example, assume an online subscription-based platform begins as a sole proprietorship but fails to transition to an LLC or corporation. This can lead to personal liability issues when disputes arise. Or, if a family-owned bookstore chain remains a partnership even after significant expansion, this can lead to tax inefficiencies and decision-making bottlenecks.

An unsuitable business structure can lead to tax inefficiencies, personal liability, and governance issues.

Risks: Financial losses, personal asset vulnerability, and ownership disputes.

• Evaluate and reassess your business structure at various growth stages.
• Consult with legal and financial professionals about the most appropriate structure.
• Plan and execute structural transitions with clear communication to all stakeholders.

Changing your business setup as you grow protects assets and improves operations.

7. Neglecting data protection and privacy regulations

With growth comes handling increased customer data, which necessitates stringent data protection measures.

For example, if an e-learning platform expands its user base but neglects GDPR compliance, it will result in legal action from European users. If a chain of wellness clinics doesn’t securely store patient data, this can lead to breaches and violations of healthcare privacy regulations.

Non-compliance with data protection laws can lead to penalties, loss of customer trust, and reputational damage.

Risks: Regulatory fines, class-action lawsuits, and brand image erosion.

• Regularly review and update data protection practices and policies.
• Train staff on data handling best practices and legal requirements.
• Monitor changes in data protection laws, especially when operating in multiple regions.

Strong data protection meets rules and boosts customer trust.

8. Inadequate crisis management planning

As businesses scale, they become susceptible to unforeseen crises, necessitating proactive planning.

For example, if a popular streaming service experiences a data breach but doesn’t have a response plan, this can lead to user panic and a PR nightmare . Or, assume a cosmetic brand faces a product recall but reacts slowly due to inadequate crisis planning. This can increase customer concerns.

A lack of crisis management can magnify the impact of adversities, damaging brand reputation and finances.

Risks: Prolonged business disruptions, financial setbacks, and loss of stakeholder trust.

• Develop a comprehensive crisis management plan that covers various potential scenarios.
• Engage legal counsel in drafting and reviewing crisis response measures.
• Conduct regular crisis response drills for key personnel.

Planning for crises can soften their impact and maintain brand trust.

9. Overlooking key regulatory changes

Growth often means navigating a complex web of regulations that can change over time, especially across regions.

For example, if a global e-commerce platform misses out on updating its operations in line with changing customs regulations, this can lead to shipment delays and customer complaints. Or, if a chain of fast-food joints neglects to comply with updated health standards in a certain region, this can result in closures and penalties.

Failure to adapt to regulatory changes can result in non-compliance, legal actions, and fines.

Risks: Legal penalties, operational disruptions, and reputation damage.

• Stay informed about industry-specific regulatory updates.
• Dedicate resources to ensure compliance across all operational areas.
• Collaborate with legal experts familiar with your business sector and region.

Keeping up with new rules helps the business run smoothly and avoids unexpected fines.

10. Ignoring ethical considerations in business decisions

Rapid growth can sometimes blind businesses to ethical considerations, leading to questionable decisions.

For example, if a tech platform, in its bid to expand, sells user data unethically, this can cause public outrage and legal inquiries. Or, if a clothing brand sources materials from ethically questionable suppliers to cut costs, this can lead to negative publicity and boycotts.

Ethical missteps can damage brand reputation, alienate customers, and lead to legal repercussions.

Risks: Boycotts, legal actions, and employee dissatisfaction.

• Incorporate ethical guidelines into your business strategy.
• Regularly review supply chains, partnerships, and business practices for ethical soundness.
• Foster a company culture that prioritizes ethical considerations.

Making ethical choices protects your brand and builds lasting trust.

11. Not regularly reviewing contracts and agreements

Business contracts evolve with growth. Overlooking periodic reviews can leave loopholes and outdated clauses.

For example, if an e-commerce platform continues to operate on an old supplier agreement, it leads to unfavorable pricing and missed revenue opportunities. If a growing restaurant chain doesn’t update its franchising agreements, this can result in inconsistent standards across branches.

Stale contracts may not adequately represent or protect current business interests.

Risks: Legal disputes, unfavorable terms, and loss of assets or opportunities.

• Schedule regular reviews of all business contracts.
• Consult legal counsel to ensure contracts align with current business objectives.
• Be proactive in renegotiating terms when business dynamics change.

Managing contracts well protects your interests and boosts growth chances.

12. Failing to protect intellectual property

Intellectual property, like patents, trademarks, and copyrights, are valuable assets. Neglecting them can lead to unauthorized use or imitation.

For example, if a software startup doesn’t patent a unique algorithm, competitors could create similar products. If a beverage company neglects to trademark its logo, this can lead competitors to imitate the logo and confuse customers.

Unauthorized use of IP can dilute brand value and result in financial losses.

Risks: Loss of exclusivity, brand confusion, and costly litigation.

• Stay informed about the IP rights relevant to your industry.
• Register and periodically review IP assets.
• Act promptly against any unauthorized use or infringements.

Guarding your IP keeps you ahead in the market and maintains your brand's reputation.

13. Mismanaging employees

As businesses grow, managing human resources becomes intricate. Ignoring employee rights or misclassifying workers can lead to trouble.

For example, if a digital agency classifies regular employees as freelancers to save on benefits, this can result in legal actions for misclassification. If a retail chain ignores local labor laws in a new region, this can lead to strikes and legal issues.

Employee disputes can disrupt operations and damage company morale.

Risks: Legal actions, financial penalties, and decreased productivity.

• Ensure compliance with labor laws across all regions of operation.
• Establish clear employment contracts and routinely update them.
• Create open communication channels for employees to voice concerns.

Valuing employee well-being boosts loyalty, increases work output, and reduces legal issues.

14. Inefficient debt management

As businesses expand, they may incur debts. Mishandling these obligations can jeopardize financial health.

For example, if a growing online retailer takes on excessive debt for inventory but faces sluggish sales, this can strain liquidity. If a hotel chain doesn’t effectively manage its expansion debts, it leads to selling prime properties.

Poor debt management can strain cash flow, impede growth, and affect creditworthiness.

Risks: Insolvency, credit score impact, and unfavorable financial terms in future deals.

• Maintain a balanced debt-to-equity ratio .
• Regularly review and strategize repayment plans.
• Prioritize high-interest debts to reduce financial burden.

Smart handling of debt supports steady growth and keeps finances stable.

15. Neglecting exit strategy planning

Every growing business, at some point, will face transitions. Without a clear exit or succession plan , transitions can be messy.

If the founders of a popular gaming app lack a clear exit strategy, this can lead to disagreements and a hurried, undervalued sale. If a family-run manufacturing firm hasn’t established a succession plan, it can cause inter-generational disputes and operational disruptions.

Ambiguous exit strategies can lead to disputes, loss of business value, and missed opportunities.

Risks: Leadership vacuum, reduced sale value, and internal conflicts.

• Begin exit planning well in advance of any anticipated transition.
• Seek external advice to assess business value and transition options objectively.
• Communicate plans and expectations to all stakeholders.

Planning exits early makes transitions easier, keeps business value, and considers everyone involved.

Avoiding legal missteps propels your business forward. Stay proactive and informed to fuel growth and trust. In business, acting early often means thriving longer.

Disclaimer: Legal information is different from legal advice. This post does not address all relevant business or legal issues unique to your situation. You should seek legal advice from a licensed attorney in your state (or country) to confirm that the information in this article and your interpretation of it is appropriate to your specific situation.

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CMQOE , Management

• Legal and Regulatory Factors in Strategic Planning

** Unlock Your Full Potential **

Strategic planning is an essential component of business strategy . It involves defining the organization's overall goals, identifying the strategies needed to achieve those goals, and developing the plan for implementing these strategies. A well-developed strategic plan will help ensure that the company has identified its most promising opportunities and is prepared to capitalize on them.

The key to successful planning is to understand your current situation and future needs clearly. This requires knowing both the internal and external factors affecting your organization. Internal factors are those within the firm itself, such as the competitive forces faced by the firm, the capabilities of management, and the availability of resources. External factors include those outside the firm, including government policies and regulations, economic conditions, technology trends, and changes in customer preferences.

In this post, our focus is the legal and regulatory factors, which are a part of the external environment affecting strategic planning .

Legal in PESTEL

In the PESTEL Analysis , the last letter "L" stands for "Legal." Legal is a part of the external environment that impacts the business operations of firms. This includes governmental laws, rules, regulations, and policies.

Legal and Regulatory Factors

Legal and regulatory factors define and describe how legal and other regulatory factors can influence strategic decisions. Legal and regulatory aspects are often considered together because they share many characteristics.

Legal and regulatory factors are laws, rules, and regulations that govern the conduct of individuals, businesses, organizations, and governments. Laws and regulations are created by legislatures, courts, and administrative agencies. Some laws and regulations apply to all citizens equally; others are designed to protect certain groups of people, such as consumers, investors, employees, or landowners.

Legal and regulatory factors can play a significant role in determining the success of a business venture. A failure to comply with applicable laws and regulations can result in fines, penalties, lawsuits, or even imprisonment for corporate officers. Even when firms avoid these consequences, they still face the risk of negative publicity, loss of customers, and damage to reputation.

Examples of legal factors include:

•The Securities Act of 1933 regulates securities trading.

•The Foreign Corrupt Practices Act (FCPA) prohibits bribery of foreign officials.

•The Sarbanes Oxley Act of 2002 requires public corporations to provide accurate financial statements.

•The Health Insurance Portability and Accountability Act (HIPPA) of 1996 requires hospitals to give patients access to medical records.

•The Fair Labor Standards Act (FLSA) requires employers to pay minimum wages and overtime to workers.

•The Employee Retirement Income Security Act (ERISA) protects employee retirement benefits.

Examples of regulatory factors include:

•Federal environmental laws address pollution caused by industrial facilities.

•The Occupational Safety and Health Act establishes standards for workplace safety.

•The Consumer Product Safety Act addresses product defects and recalls.

•The Clean Air Act requires industries to clean up air pollutants.

•Tax laws impose various tax rates depending on income level.

•The Food and Drug Administration regulates drug manufacturing and distribution.

Legal and regulatory factors affect a firm's ability to compete in the marketplace. In some cases, regulation may create barriers to entry for new competitors . When this happens, it limits competition and keeps prices high. The nature of legal and regulatory factors varies widely from country to country. Although most nations have similar laws, there are significant differences among them. These differences cause competitive advantages and disadvantages for domestic firms.

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Small Business UK

Advice and Ideas for UK Small Businesses and SMEs

8 legal considerations when setting up a business

Open for business: you may have to consult a solicitor when establishing your company

One of your first legal steps will be to register your business and choose your structure

If you are setting up a business for the first time, there are many legal matters to contend with. Some might be obvious, like learning business tax regulations. Others you may not have considered, such as registering your logo as a trademark.

Thankfully, there are many resources available that can make the process simpler. Take things step by step, and make sure you get everything right before you start.

Small Business Pro has a 24/7 legal and tax line that you can call if you need dedicated expert support. It will also help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.

You can find out more about Small Business Pro here .

#1 – Choose your structure

One of the first steps from a legal perspective will be to register your business. You must decide whether you want to do so as a sole trader, a limited company or a partnership. Each of these structures will have different advantages, disadvantages and considerations which you will need to take into account.

How you structure your business will determine how you pay taxes and secure funding, and the options which are available to you will depend on the type of work you do, so it is important to research which option is best for you.

Where you register will also depend on this structure. You may need to register with Companies House if you are setting up a limited company or limited liability partnership (LLP) or only with HMRC if you are setting up a business partnership.

>See also: How to become a sole trader

#2 – Identify who has control

If you are registering a limited company, you will need to appoint a director or directors, and identify the people with significant control over the business, as details of such persons must be included as part of the registration. You can find guidance on the UK government website about registering with Companies House, and about how your legal responsibilities differ depending on the type of business you are setting up.

#3 – Trademark your logos

You will also need to choose a name and ensure this is not already in use or infringe on any existing trademarks. You can search existing UK trademarks on the Intellectual Property Office website , but this can be a labour-intensive process and without expertise in this area, it can be hard to decide whether a similar name represents trademark infringement. It is useful to obtain the views of an experienced solicitor, who can help you to create and, if necessary, register your unique business name.

An important consideration in the early stage is the scale of your business and whether you intend for your business to trade overseas. You may not be ready for that at this early stage, but if it’s part of your planning for the future, you should research trademarks in those countries to make sure your business name is not already registered there.

Finally, you may wish to register any logos, slogans, jingles or other branding as trademarks or service marks. A solicitor can also help you determine the cost of protecting your intellectual property assets in this way. It may not be cost-effective to seek registration, because copyright may provide you with adequate protection.

>See also: Small business logos we really love

#4 – Keep accurate records

One aspect that applies to all businesses is you must keep accurate financial records of your transactions, income and expenses.

As a sole trader, you can usually decide whether to record income and expenses on the day they are invoiced or billed or record them on the day the money is transferred. As well as all income and expenses, you will need to keep VAT records and PAYE records where relevant, and records about your personal income, to enable you to calculate your tax return at the end of the financial year.

You will need to keep more records when operating a limited company. Like a sole trader, you must record all income and expenses (keeping receipts, invoices, bank statements and a cash book if necessary). You must also record all assets owned and debts owed by the company and keep records that will enable you to calculate the value of stocks owned by the company at the end of each financial year.

Beyond financial records, a limited company must keep details of its directors, shareholders, company secretaries, results of any shareholder votes and resolutions and information about people with significant control; that is, anyone with more than a 25 per cent share or voting rights in the business, or who can influence or control the company in another way. If your records are kept elsewhere than your registered office, you must make Companies House aware of this.

#5 – Get a members’ agreement (for LLPs)

If you intend to establish an LLP, you will need a members’ agreement that will determine how the LLP will operate. You can prepare one yourself, but it is better to have a solicitor do this for you to ensure that it is legally binding and covers the most important details. This is also the case for many business contracts, which should be reviewed by a solicitor before you begin hiring employees or conducting business with other companies.

#6 – Know your data obligations

You should also be aware of your data protection obligations. While you have a responsibility to keep information on businesses and people whom you buy and sell from, this is only lawful under current data protection regulations if the person has consented to the collection of their personal data, the collection of the data is necessary for the fulfilment of a contract, or compliance with a legal obligation. While many businesses like to collect data on customers for purposes such as market research or targeted advertising, you must approach this carefully to ensure your data collection and processing comply with the law. You must also be confident that the data you are collecting about customers and suppliers is only as much as you need to meet the purpose for which it is being collected.

#7 – Get employers’ liability insurance

If you are employing members of staff, you will need employers’ liability insurance that covers your business for at least £5m. You can face significant fines if you do not comply. While this is the only type of business insurance that is compulsory, there are other types of insurance that may help to protect your business and it is worthwhile to discuss the available options with an insurance broker to see what might be relevant for the type of business you want to start.

#8 – Get a solicitor on board

Ultimately, while many of the processes described above can now be done online without assistance, you should consider taking professional advice when setting up your business. Even if you are an experienced entrepreneur, regulations constantly change, and it can be hard to keep up with your legal responsibilities unless you have professional support to help you get it right.

Stephen Newman is head of corporate at Ramsdens Solicitors

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Starting a business

Self-Employment

Starting a business in Russia

Doing business in Russia may mean following new rules, registering with the Russian company register, and working alongside or in competition with Russian entrepreneurs. Understand the process of starting a business in Russia with this guide.

By Expatica

Updated 13-8-2024

Important notice from the Editor in Chief

Maintaining our Russian site is a delicate matter during the war. We have chosen to keep its content online to help our readers, but we cannot ensure that it is accurate and up to date. Our team endeavors to strike the right balance between giving information to those who need it, and respecting the gravity of the situation.

Tired of the endless loop of finding work only to boost your CV ? Maybe the time is right to set out on your own and start a business. If you are a foreign individual or company looking to start actively doing business in Russia, what do you need to know and what do you need to do to get started? What options do you have in terms of how to structure your business?

This guide covers the essentials for starting up a business in Russia, including:

Immigration status

Business plan for conducting business in russia, legal structure, choosing company name and address, foundation documents, joining the russian company register, make a company seal, open up a bank account for conducting business in russia, limited liability company (ooo), joint-stock company, partnership, the rules of doing business in russia, etiquette and social custom, russian entrepreneurs and self-employed sole traders in russia, foreign companies registered for work in russia, business in russia: visas, taxes and accounting for russian businesses, employing foreign staff in russia, useful resources, how to start a business in russia.

There are a number of things to consider and processes to go through if you are an individual or company thinking of starting a business in Russia. You need to start off with basic considerations such as whether you can legally operate as a business in Russia.

Russian business culture

You also need a business idea that is likely to work, before moving onto practical considerations such as choosing a legal structure, drawing up documents, joining the Russian company register, and opening up a Russian bank account for your business.

The first thing to do if you are a foreigner wanting to start a business in Russia is to make sure your immigration status allows you to trade in the country. Will you need a business or work visa or a residency permit? See the below section on business visas in Russia for more information.

Secondly, do you have a feasible idea and have you researched the market to assess whether your business is likely to be successful in Russia? Before launching into any business venture, it’s a good idea to draw up a business plan to answer all of the questions about whether your business idea is likely to not only get off the ground but sustain itself in the long-term. Successful Russian entrepreneurs know that it’s all well and good having an innovative idea, but not all business ideas succeed in practice so it pays to plan properly.

Download business plan templates and look at sample business plans from various industries. You can also check a website such as this one which maps businesses in Russia. You can search the site by business category or name.

If you can start a business in Russia and are confident that your business idea works, the next step is to decide on your business legal structure. Information on options available is in the section below on Russian company types.

You need to choose an appropriate trading name for your Russian business (ensuring that you don’t choose a name that someone else has already registered) along with an address to register your Russian business at.

In accordance with Russian legislation, the founders of the business need to draw up the foundation documents (charter and founding agreement). The process for this will vary according to which legal structure you choose, but should include the following:

• full company name (plus any abbreviation it will use in business transactions)
• names and signatures of the company founders
• the amount and nature of shareholder contributions (cash or in-kind)
• rules for the running of the company
• legal responsibilities
• details of any directors, if applicable

For Limited Liability Companies and Private Joint-Stock Companies, the minimum legal capital requirement is R10,000 per individual, with 50% at the point of registration and the remainder paid within the first 12 months.

Once the company documents are drawn up, incorporate your Russian business by sending the following documents to the registration office of the Federal Tax Service (FTS) :

• registration application form including notarized signatures (cost of R200)
• copies of foundation documents
• proof of legal status of business founder(s)
• receipt of the state registration fee (which costs R4000)

A copy of the registration application form is available on the FTS website .

You can find your local FTS office here .

Once these documents have been sent, the FTS makes a decision within five working days. They either approve your business to the State Register or refuse the registration. A list of grounds for refusal is available in article 23 of the Federal Law no. 129-FZ.

If your business in Russia is accepted, this process also registers the business for tax purposes. You will receive the following documents within 7 days of the submission of your application:

• the Incorporation Certificate (or Certificate of State Registration) for your business
• Tax Certificate
• Tax Identification Number for the business
• copy of your foundation documents with the mark of registering authority
• Extract from the Common State Register of Legal Entities

This is the official mark of the business and is produced by a professional company. Company seals are no longer a legal requirement in Russia following a change in the law in 2015, however many Russian businesses still have seals. The cost for producing one is R500.

Once you have all the official documents from the FTS, you can open a local business bank account. You need a notarized copy of the signatures (cost of R200 per person) for the account. To open a business account in Russia, you will need the following:

• Incorporation Certificate and Tax Certificate from the FTS
• Founding documents of your business
• Your Russian business license (if applicable for your business)
• Notarized signatures
• Documents confirming the identity and authority of the signatories of the account

Once you have completed these steps, you are free to start the running of your Russian company which will inevitably involve a lot of organizing, marketing, etc. Where the hard work really begins! The steps above should take around 18-21 days in total to complete.

Russian company types

There are a number of different legal structures to choose from for a Russian business. You’ll need to determine which one you will opt for before you move forward with most of the steps in the section above. Full details of legal business structures and their features are available in the Civil Code and companies law of the Russian Federation – Federal Law 14-FZ ( Limited Liability Companies ) and Federal Law 208-FZ (Joint-Stock Companies). The six main types of Russian companies are:

This is the most common type of business in Russia. An OOO can have a maximum of 50 shareholders who need to contribute a minimum of R10,000 each (50% payable on registration). Shareholders are jointly liable for company debts up to the registered capital amount.

The management structure consists of 1) general meeting (the highest body that meets at least once a year) and 2) board of directors (oversees general business activities). In some cases, an executive committee may also be formed.

Any Russian or foreign individual (or company) can be a founder or shareholder of any number of Russian OOOs, although to be a board member or director you will have to have the necessary visa and/or residence permit to live in the country if you are a foreigner. An OOO is a Russian legal entity that can conduct any form of activity not prohibited by the Russian Federation. They will need a license to conduct any licensed type of activity.

This can be either open (OAO) or closed (ZAO). The ZAO is a private Russian company and is very similar to the OOO. The OAO is a public company. The main differences are that an OAO can have more than 50 shareholders, shares are freely transferable to the public (rather than just between shareholders), and the minimum requested capital contribution is R100,000.

The management structure and shareholder liability of both types of joint-stock company are similar to the OOO.

Partnerships are often more suitable for small businesses in Russia. There are two types of partnership in Russian business:

• General partnership – where two or more individuals (or companies) have equal rights and liabilities based on a partnership agreement. Unlike with limited liability and joint-stock companies, personal assets can be used to cover debts with a general partnership. Management is shared between partners and the business capital is detailed in the partnership agreement.
• Limited partnership – where the partnership has two types of partners. General partners who are fully liable for debts and profits, make the main decisions and can cover costs with personal assets; and limited partners who are only liable up to their contribution to the business capital.
• Sole ownership  – this is for individuals starting a Russian business on their own. Details are in the below section on freelancers and self-employed.
• Branch  – a subdivision of a foreign company based in Russia and entitled to conduct commercial activity. Not considered a separate legal entity from the overseas company and treated as non-resident More details in the section on foreign companies registered in Russia below.
• Registered Office  – a subdivision of a foreign company based in Russia with the purpose of representing company interests in Russia, but not allowed to undertake commercial activity. Not considered a separate legal entity from the overseas company and treated as non-resident More details in the section on foreign companies registered in Russia below.

> Personal and corporate security is a major issue in every city. Background checks of employees and subcontractors are critical.

> Reimbursement of business losses, legal remedies for fraud, and recovery of damages are almost non-existent. Use Russian legal counsel for safeguarding your interests. Intellectual property laws are in their infancy.

> Business is hierarchical. Find out who’s who before a meeting and do business with the decisionmakers. Business cards are essential.

> Russians are addressed by their name and father’s name carried by all Russians rarely by the family name. For example – Alezander Petrovich – which translates literally to Alexander son of Peter.

> Russians like direct talk. Underline the profitability factor early in the meeting, but remember they consider too much compromise as a sign of weakness. Often the final deal is not final; you may strike a better bargain by holding out a bit more. When a deal is struck, businesspeople seal it off with a glass of vodka.

> Punctuality is not a strong point of the Russians, but they expect foreigners to be punctual.

> When dealing with bureaucrats, patience is a virtue. In government offices, small gifts and money can work wonders. It is important to know how the official and unofficial systems work.

> Corruption and petty theft is rampant, even amongst employees. It is good to be cautious.

> An expat needs to be flexible with his Russian colleagues. To get the best, motivate them, allow them to feel secure, and voice their feelings. Sell your ideas to your Russian colleagues, don’t force them.

Remember learning how to unlock the human potential of Russian employees is critical for a foreign firm to be successful in Russia. Sometimes the company atmosphere, non-monetary benefits and a guarantee of a stable future is more important for a Russian than the salary.

At home you see a very different side of the Russians you know at work. It is an honor to be invited to a Russian home and there are certain rules to remember when you visit a Russian home for the first time:

> Bring a gift when invited. Wine, cake, chocolates and flowers are common choices. Flowers should be given in odd numbers and avoid yellow roses, which are a sign of separation.

> Don’t shake hands or kiss across the threshold of the doorstep as this brings bad luck. Remove your gloves before shaking hands. Take off your shoes before entering the house.

> Both the guest and host should dress well.

> Traditionally a guest will be directed to a table laden with food and drinks immediately upon arrival, though the influences of ‘European’ behaviour are becoming increasingly evident. At the table you should participate actively in conversation.

> Accept all food and alcohol. Russians enjoy their drinks; if you decline, do so tactfully.

> Russians have a particularly unique form of toasting. Take part and learn it, as you should give toasts when entertaining.

> Often the host will talk about his travels, prized possessions or achievements. They might even bring out family albums. Be sure to show your appreciation. More often it is a way of opening up to a guest. Russians can take criticism and are great satirists.

> Dinners go on late into the night and there is often lot of drinking and loud talking. Don’t expect too much of formalities. Remember the best of the house is on the table, give it the due respect.

Individuals working freelance or self-employed can set themselves up as a sole ownership. This is common for those with small businesses in Russia. There is no minimum capital share requirement in this type of Russian business and the sole trader takes all the decisions and is free to use profits as they wish once personal income tax payments have been made. As with partnerships, personal assets can cover debts.

Individuals can also set themselves up as an individual entrepreneur (self-employed person) which means that they don’t have to form a legal entity as a sole proprietor. The process for setting yourself up as a self-employed person is the same as for starting up a Russian business apart from not having to draw up founding documents. You will still need to register with the FTS and will receive a state registration and tax certificate.

Companies registered outside Russia can set up a subdivision inside the country either as a branch (if wanting to engage in commercial activities) or as a representative office (if wanting to represent company interests).

These subdivisions are not considered as separate legal entities from the overseas company although they still need to be registered for tax purposes with the FTS. There is no requirement to form assets for representative offices. With branches, there is a requirement although the amount is not stipulated in Federal Law. There are no shares. The foreign company in both cases should appoint an executive body for the purpose of managing the subdivision.

You can read more about setting up an  offshore company , which is registered, established, or incorporated outside of your country of residence, in our helpful guide. This outlines the major pros and cons you need to consider, including privacy and reduced tax liability. It also explains how to register, establish, or incorporate your offshore business.

You will need to have a residence permit and the required visa (if applicable) to become self-employed, start a Russian business or hold a position in a company (e.g., partner, director, board member) where you are involved in regular decision-making. Those with temporary as well as permanent residence permits can apply to start a Russian business. Non-residents can be shareholders of Russian companies.

If you want to start up a business in Russia and you don’t have residency, you can apply for a Russian Work Visa to come and work as self-employed if you can obtain an invitation from the Russian General Directorate of Migratory Affairs (GUVM). If you are looking to start a business in Russia that might generate revenue and create jobs, you can apply for a Russian Business Visa.

Foreign investors have equal status with locals apart from certain restrictions that apply to banking and insurance sectors, some land purchase restrictions and some investments in economic entities of strategic importance. See more here .

See our guide to Russian visas  and Russian work permits  for more information on visa requirements.

The reporting year for tax purposes in Russia is 1 January to 31 December. New Russian businesses who are established before 1 October in any year are required to submit a tax return for that year. Businesses that start after that date submit their first return the following year.

All Russian businesses are required to keep properly recorded accounts for tax and auditing purposes. Limited Liability Companies and Joint-Stock Companies need to file reports to the tax authorities every quarter and VAT reports every month. Subdivisions of foreign companies are treated the same as Russian legal entities in terms of tax and accounting compliance.

Corporation tax in Russia is 20% and VAT is 18%. There is no threshold for VAT (20).

See our guide to taxes in Russia  for more information.

To employ foreign staff in Russia, you will need to obtain an employment permit from the GUVM who issue according to quotas. Once this has been secured, employees will need to obtain a work permit and visa from the GUVM.

• Russian Ministry of Industry and Trade
• Russo-British Chamber of Commerce
• Russian Trade and Economic Development Council
• Russian Investment Agency
• Russian Direct Investment Fund
• VISTA Foreign Business Support
• Russian Agency for Small and Medium Business

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Business Analysis Blog

How to do a MoSCoW Analysis and prioritise requirements in a complex environment?

How to do a MoSCoW Analysis and prioritise requirements effectively in a complex environment?

As a Business Analyst, the question of how to prioritise requirements may seem like an easy question to answer but it can also be wrought with a variety of complications and interesting complexities. Once you have overcome these potential complexities which can come with requirements prioritisation, the most relevant Business Analysis technique to apply is what is known as the MoSCoW Analysis.

This blog article will cover both how to apply the MoSCoW Analysis for requirements prioritisation as well as the considerations and complexities for a Business Analyst to understand about their environment before attempting to prioritise requirements.

So let’s start by talking about some of these complexities that can face a Business Analyst when it comes to requirements prioritisation.

#1: Different perspectives on what is important

#2: Lack of leadership

This factor walks hand in hand with the previous factor (and is most likely the cause of it!) where people have different perspectives on what takes priority. A lack of leadership in the project or initiative team causes confusion around what is important and this is when people will end up providing their own perspective around priorities rather than following business priorities or guidelines. This causes problems in various ways and can put the Business Analyst in a very awkward position. Sometimes this lack of leadership can mean that a stronger or more senior stakeholder might get the requirements prioritised according to his/her team’s preferences due to his/her position and level of influence in the organisation rather than it being the true priorities for the good of the organisation. This leads to requirement priorities which is not necessarily being implemented in the most valuable or efficient manner and consequently reflects badly on the project as a whole.

It is imperative for a Business Analyst to receive clear direction from their project manager or project steering committee about what are the clear business objectives (with their relative priorities outlined) that requirements must deliver against so that the Business Analyst can use these business objective priorities to guide the conversations when requirement prioritisation activities take place.

#3: Not prioritising requirements

In some organisations or projects there is simply no formal and explicit effort undertaken to prioritise requirements at all. This doesn’t mean requirements are not in some sort of priority, it simply means that the requirements are not prioritised in a structured and collaborative way. This type of approach can cause problems when expectations are not managed about what will be delivered by when but it can also be that prioritising the requirements are very clear cut in a particular type of project and hence this informal way works in those circumstances. So although the Business Analyst must be very careful when choosing to not formally go through a requirements prioritisation activity, it can be the most logical and suitable approach for certain types of projects.

#4: Priority levels are not well defined

The last complexity or consideration for the Business Analyst to pay careful attention to before embarking on requirements prioritisation activities are simply the definition of the priority levels and what each priority means. Many organisations have adopted a method or set of priority levels which they are used to using without it necessarily being the most effective way to prioritise.

So now that we have discussed some of the common complexities in projects and organisations that make requirements prioritisation somewhat tricky for the Business Analyst lets now look at the MoSCoW Analysis technique and how best it can be applied.

The MoSCoW Analysis Technique

The MoSCoW Analysis is a very common and effective requirements prioritisation technique because it allows not only for three clear priority levels but also covers the requirements that will end up not being included in the currently delivery or project at all. This works very well because it allows people to explicitly agree the different priorities including the requirements, which will be excluded or referred to a future release.

Let’s have a look at how this prioritization technique works:

MoSCoW is an acronym.

M = Must ‘Must’ level requirements are those requirements which will definitely be included to be delivered. There is no negotiation around whether they will be delivered and are considered mandatory requirements.

S = Should ‘Should’ level requirements are those requirements which should be included if at all possible. If the project have capacity and time and it will not jeopardise any of the “Must” requirements, then these requirements should be delivered or included in whatever the prioritisation is done for.

C = Could The ‘Could’ level requirements are the requirements which could be included if it doesn’t have any impact on any of the ‘Should’ or ‘Must’ requirements.

W = Won’t The ‘Won’t’ level requirements tend to be the requirements which will not be included to be delivered or implemented this time but are requirements that would be favoured for a future delivery or implementation.

In Conclusion

As a final point to make, it is important that although the Business Analyst uses a best practice requirements technique , the outlined complexities listed here should be addressed as much as possible prior to embarking on a requirements prioritization activity to ensure a successful and accurate outcome.

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The Biden administration said it would have saved $6 billion had the new prices been in effect last year.

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By Noah Weiland and Rebecca Robbins

Noah Weiland covers federal health policy, and Rebecca Robbins covers the pharmaceutical industry.

The Biden administration on Thursday unveiled the results of landmark drug price negotiations between Medicare and pharmaceutical companies, allowing President Biden and Vice President Kamala Harris to cast themselves as confronting the drug industry on behalf of older Americans at a critical moment in the presidential campaign.

The negotiated prices, which take effect in 2026, are expected to save billions of dollars for Medicare, which is funded by taxpayers. But they will lead to direct out-of-pocket savings for only a subset of the millions of older Americans who take the drugs subject to negotiations.

Other provisions of the law that created the drug negotiation program, such as capping patients’ expenses for insulin and their yearly out-of-pocket drug costs, will do more to save older Americans money at the pharmacy counter.

The 10 drugs subject to negotiations include widely used blood thinners and arthritis medications. Had the new prices been in effect last year, administration officials said, Medicare would have saved $6 billion, which would have reduced its spending on those drugs by 22 percent.

“This is a fight all of us have been fighting for a long time: taking on Big Pharma,” Mr. Biden said at an event in Maryland celebrating the announcement, where he and Ms. Harris had their first joint public appearance since she took over the Democratic presidential ticket.

The negotiations, a longtime aspiration of Democrats, are the first that the federal government has directly conducted with drugmakers on behalf of Medicare beneficiaries. Mr. Biden on Thursday recalled working on legislation as a senator in the 1970s that would have allowed Medicare to negotiate prices directly.

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Ukraine war latest: Second Russian bridge 'destroyed' - as Putin 'in a position he never dreamt in his worst nightmares'

Ukraine has attacked a second strategic bridge in Russia's Kursk region - as an ex-UK foreign secretary says Kyiv has put Vladimir Putin "into a position he never dreamt in his worst nightmares". Listen to a Daily podcast special on how Ukraine crossed Mr Putin's "red line" as you scroll.

Monday 19 August 2024 10:28, UK

• Big picture : What you need to know as week begins
• Second Russian bridge 'destroyed' in Kursk region
• Starmer vows 'unwavering' support for Ukraine after Zelenskyy claims UK backing has 'slowed down'
• Blast injures three people at Russian fuel plant
• Sean Bell: Humiliated Putin will respond ruthlessly to Ukrainian masterstroke
• Michael Clarke : Pokrovsk in real trouble as Russian troops advance
• Listen to the Daily above and tap here to follow wherever you get your podcasts
• Live reporting by Claire Gilbody Dickerson

Russia says Ukraine has attacked a third bridge in the Kursk region invaded by Ukrainian forces almost two weeks ago. 

It said Ukraine had struck and damaged a bridge over the Seym river on Sunday.

Details of the latest bridge attack were revealed in a video statement from a representative of Russia's investigative committee, which was posted on the Telegram channel of Russian state TV anchor Vladimir Solovyov.

A Ukrainian commander said on Sunday that its air force had destroyed a strategic bridge over the Seym river in Kursk region - the second attacked by Ukraine since Friday - limiting the supply capacity of a Russian group opposing the Ukrainian advance. 

Vladimir Putin has travelled to Azerbaijan's capital of Baku to meet his counterpart, Ilham Aliyev, in his first visit since the invasion of Ukraine in 2022.

The Russian president arrived in the country yesterday for a two-day visit, during which talks will be focused on "international and regional problems," the Kremlin said. 

It comes as Russian forces are scrambling to tackle a surprise attack by Ukraine into Kursk, which Ukrainian President Volodymyr Zelenskyy says is aimed at creating a buffer zone to protect his country. 

The meeting follows reports in June of the EU and Ukraine asking Azerbaijan to facilitate discussions with Russia regarding a gas transit deal.

The EU has cut most of its Russian gas imports but some central European countries still depend on gas from Russia via a pipeline that crosses Ukraine. This includes Austria which still receives most of its gas through this route.

Elon Musk has denied claims he gifted a Tesla cybertruck to Russian general and Chechen warlord, Ramzan Kadyrov.

The billionaire responded to Ukrainian official Anton Gerashchenko, who posted footage on X purporting to be of the warlord receiving the vehicle. 

According to Mr Gerashchenko, the warlord said he would send the vehicle, on which he appears to have attached a machine gun, to the frontline.

According to a translation by the Ukrainian official, Mr Kadyrov thanked Musk for the vehicle, before inviting him to Grozny, the capital city of Chechnya, where he would be received "as the most dear guest".

"I do not think that our Russian MFA [Ministry of Foreign Affairs] will be against such a trip," Mr Gerashchenko said.

"And, of course, we are waiting for your new developments that will contribute to the completion of the SMO [special military operation]."

Musk, who is the CEO of Tesla Motors and also owns X, denied the claim in a comment on the social media platform. 

He wrote on X: "Are you seriously so retarded that you think I donated a cybertruck to a Russian general?"

A fire has ripped through a fuel pipeline at the Sterlitamak petrochemical plant in Russia's Bashkiria region after an explosion and injured three people, local authorities are reporting.

Images are emerging of firefighters trying to extinguish the blaze and emergency services have said the fire had been brought under control.

It is not clear what has caused the incident.

The plant, located 1,500 km (930 miles) east of Moscow, produces rubber and high-octane additives for fuel and jet fuel.

The Interfax news agency, citing local officials, said production at the plant was continuing despite the fire.

Ukraine has put Vladimir Putin "into a position he never dreamt in his worst nightmares", former foreign secretary Malcolm Rifkind has told Sky News.

Asked whether the invasion into the Russian territory of Kursk had been a gamechanger in the two-year war between Russia and Ukraine, Mr Rifkind said: "It's not by itself something that is going to defeat Russia. 

"But it puts Putin into a position he never dreamt of in his worst nightmares that he would be in because the Ukrainians have shown the complete uselessness of the Russian forces."

Mr Rifkind, who was foreign secretary under former prime minister John Major, went on: "Putin has always prided himself that the thing he does is provide security to Russia.. 

"Well this war has been a disaster for him, the change to NATO has been Sweden and Finland joining, which they had never done for almost 70 years, and now he finds parts of Russia occupied by the Ukrainians."

By Deborah Haynes , security and defence editor, near Russian border

The military pickup truck accelerates as it bursts out of a treeline and across an open field towards a Ukrainian mortar position about half a mile from the Russian border.

A soldier sitting in the back with a Sky News team says the extra speed is needed because of the threat from Russian drones.

Once more under the cover of woodland, the vehicle slows slightly as it bumps along a dirt track before pulling into a clearing, still shaded by overhanging branches - a natural shield from any watching eyes or bombs in the sky.

A mortar team, led by a commander called Junior Lieutenant Dmytro, emerges from a makeshift shelter, dug into the earth.

They say their mission on the Ukrainian side of the border in Sumy region has transformed since Ukraine invaded Russia almost two weeks ago.

You can read the full eyewitness account from Haynes here...

George and Amal Clooney's non-profit foundation has effectively been banned by Moscow and joined tens of foreign groups which have been designated as "undesirable". 

The Clooney Foundation for Justice, a US non-profit group, was accused of "carrying out work on a Hollywood scale aimed at discrediting Russia," the prosecutor general's office said on Telegram. 

It provided no evidence to back up the claims. 

 "It actively supports false patriots who have left the country," the office added. 

Russia started classifying organisations as "undesirable" in 2015 and in addition to NGOs, the list of banned organisations includes media outlets, political, cultural and religious groups that Moscow claims are threat to the country's security.

Ukraine's shock invasion of the Russian territory of Kursk has been "turning the tables on Vladimir Putin",  our security and defence editor  Deborah Haynes says.

In his nightly address yesterday, Ukrainian President Volodymyr Zelenskyy gave a clear indication as to the goals of the two week-old  invasion for the first time, saying he wanted to create a buffer zone for his country. 

Speaking from Sumy, which neighbours Kursk, Haynes notes how it is the very same reason used by Mr Putin when his forces reinvaded the northeastern region of Kharkiv in May this year. 

Haynes also says Mr Zelenskyy really values the Kursk offensive - the largest invasion of Russia since the Second World War - as he has "thrown a lot of the limited supplies of Western weapons into the fight".

For context : This weekend, Volodymyr Zelenskyy said his troops had strengthened positions in Russia's Kursk region, nearly two weeks into their attack, and called for bold decisions by Kyiv's allies to allow long-range strikes.

Ukraine said it had seized more than 80 settlements over 1,150 square kilometres since 6 August.

He said that the operation in the Kursk region was going according to plan and Ukrainian troops continued to advance and strengthen their positions. 

"The long-range capability for our forces is the answer to all most important, most strategic questions of this war," he said.

Indian Prime Minister Narendra Modi will visit Ukraine, the Indian foreign ministry has said.

It is his first trip to war-torn Ukraine since Russia launched its land, air and sea invasion of the country in February 2022. 

In July he met Vladimir Putin in Moscow.

What has India said about the war?

India has refrained from directly blaming Russia for the war, while urging neighbours to resolve the conflict through diplomacy.

New Delhi is an old friend of Russia but it is also seeking to strengthen its ties with the West.

We brought you reports yesterday that the Ukrainian air force had attacked a second bridge in Russia's Kursk region.

Here is what we know...

The strategic bridge over the Seym River in Russia's Kursk region was blown up to limit the supply capacity of a Russian group opposing the Ukrainian advance, Ukraine's commander Mykola Oleshchuk said.

He posted a video showing a growing cloud from an explosion on a bridge and one of its sections destroyed.

In a message on Telegram he also wrote: "Kursk direction. Minus one more bridge! Ukrainian air force aviation continues to deprive the enemy of logistical capabilities with precision airstrikes, which significantly affects the course of hostilities."

The bridge is the second attacked by Ukraine since Friday.

Military analysts have said there were three bridges in the area through which Russia supplies its forces and that two of them have been either destroyed or seriously damaged.

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