Dear Don:
I’m starting a new business and don’t have a lot of money right now. It’s just me, so I don’t need to protect anyone else, but I do want to protect my home and my family. What can I do safely by myself while I’m getting the business off the ground?
Start-up.
Dear Start-up:
You can do a couple of basic things yourself, and then get a lawyer and an accountant involved as soon as possible, to be sure all the right pieces are in place. If you can, have a couple of short meetings with a lawyer and an accountant early on to plan what you will need to do and when. This will save you time and money later.
You mentioned that you want to protect your family assets. There are a couple of options for that, but the easiest, cheapest and fastest option here in Colorado is the “limited liability company,” or “LLC.” The short explanation is that the law considers an LLC a different “person” from you, so as long as you keep your personal affairs separate from the business, you will have some pretty good protection for your assets.
You can go online to the secretary of state’s website and create your LLC. Be sure to follow ALL the directions, including the ones about the name of the company. You should have an “Operating Agreement” drawn up fairly soon. This is the document that controls how the business operates, what happens if you bring in other owners, and what happens under a number of other circumstances. It has the added effect of showing how you and the business are really different “persons,” which is why you set up the LLC in the first place. I suggest you get a lawyer involved so you can be sure you have all the right language in the operating agreement. It is an investment in peace of mind.
Remember to register with the IRS and any state or local tax authorities, open separate bank accounts, get the right insurance, and keep in mind that the LLC is a separate business and not your personal property.
Good luck!
Don
Don Jacobson’s 40+ year practice involves helping individuals and small businesses in a wide variety of legal matters. He has assisted in establishing a number of nonprofit organizations, and in obtaining their recognition as nonprofits by the IRS.
Don is a graduate of The University of Texas and the University of Denver Sturm College of Law and has formal post-graduate training and certifications in mediation and negotiation. He has taught in both academic and internship programs at the Sturm College of Law, and participates in the student mentoring program. He has lectured on effective advocacy and negotiation for the National Institute for Trial Advocacy and for other professional associations. Don can be reached at djacobson@ljjlaw.com.