The Ultimate Business Owner's Handbook:

Legal Strategies for Success from a Business Lawyer

By Jacob Tingen | May 17, 2023 | Business & IP

Welcome to the Ultimate Business Owner’s Handbook: Legal Strategies for Success from a Business Lawyer, your comprehensive guide to legal strategies for business formation, compliance, and growth.

As a business owner, it’s crucial to understand the legal aspects of running a successful company.

In this handbook, we’ll share our expertise as lawyers and business owners to help you navigate the complexities of business law and intellectual property rights, while also introducing you to the concept of a fractional general counsel.

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Empowering You with Expert Knowledge

Our goal with the Ultimate Business Owner’s Handbook is to share our knowledge and experience as business lawyers, business owners, and entrepreneurs. By addressing the unique needs of growing businesses and startups, this guide empowers entrepreneurs to navigate the legal landscape with confidence, ensuring the success and longevity of their companies.

This guide will cover a variety of topics such as business formation, protecting intellectual property (trademarks and copyrights), contracts, recommendations on tools to help businesses meet legal and compliance needs, and the benefits of engaging with transactional and litigation services.

As you explore the handbook, you’ll gain a deeper understanding of the legal aspects of running a business, empowering you to make informed decisions that protect your company and support its growth. 

With the right guidance from an intellectual property lawyer or business lawyer, you can confidently tackle challenges and seize opportunities in today’s business environment.

Dive in and discover the expert strategies that will help you build a thriving, legally compliant business!

Who is The Ultimate Business Owner's Handbook for?

Other Businesses That Can Benefit

While the core content is geared towards businesses with $1 million to $5 million in annual revenue and funded startups, the Ultimate Business Owner’s Handbook can also benefit other businesses such as:

• Businesses with annual revenues between $5 million and $20 million
• New businesses and startups without secured funding

For new businesses and startups without secured funding, you’ll find valuable information here that can guide your initial steps and set you up for long-term success as you lay the groundwork for your company.

Businesses with annual revenues between $5 million and $20 million can also find valuable insights in this handbook as they grow and expand. 

Fractional General Counsel:

A Game-Changer for Growing Businesses

The Ultimate Business Owner’s Handbook not only covers essential legal topics but also introduces you to the benefits of working with a fractional general counsel.

Many business owners are familiar with the concept of a fractional CFO (a part-time financial expert who offers financial management and business consulting services).

A fractional general counsel is a similar idea applied to the legal industry. These professionals provide ongoing legal services and consultancy, helping businesses navigate the legal landscape without the need for a full-time, in-house legal expert.

Benefits of fractional general counsel include:

• Proactive legal services
• Strong attorney/client relationship
• Regular communication
• Greater responsiveness
• Flexible service offerings
• Predictable costs (typically via subscription)

By partnering with a business lawyer who understands your industry and your company’s unique needs, you’ll gain a valuable ally in your quest for success.

Common Problems with Traditional Legal Services

As a business owner, identifying and addressing legal issues is crucial to safeguarding and growing your business. However, working with traditional legal services can present challenges that may hinder your business’s progress. These challenges include, but are not limited to:

• Unpredictable costs
• Lack of responsiveness from the lawyer
• Inflexible service offerings
• Reactive legal help

In this section, we discuss these common challenges business owners face when working with traditional legal services.

Lack of Responsiveness

When running a business, “time is money”. 

Slow response times from traditional legal professionals can hinder your ability to make crucial decisions and move forward with your business operations. It is vital to work with a legal expert who understands the importance of timely communication and is committed and able to provide the support you need promptly.

To overcome this challenge, consider establishing clear communication guidelines and expectations with your legal service provider from the onset of your engagement. 

This includes defining response times for different types of inquiries, setting regular update meetings, and agreeing on communication channels. By fostering a strong attorney-client relationship, you can ensure greater responsiveness and regular communication, allowing you to make well-informed decisions without unnecessary delays.

The Advantages of Fractional General Counsel

In the evolving landscape of legal services, Fractional General Counsel has emerged as an innovative solution that offers a variety of benefits including:

• Proactive legal services
• Strong attorney/client relationship
• Regular communication
• Greater responsiveness
• Flexible service offerings
• Predictable costs (typically via subscription)

This service model not only addresses the common problems associated with traditional legal services but also provides additional advantages that align with the strategic growth of your business.

Strong Attorney-Client Relationship

Another key benefit of engaging a Fractional General Counsel is the opportunity to develop a strong attorney-client relationship. This relationship is built on trust, regular communication, and a deep understanding of your business.

When you Strong Attorney-Client Relationship work with a Fractional General Counsel, you have a dedicated legal advisor who becomes an integral part of your team. They take the time to understand your business, its goals, and its unique challenges. This relationship allows for a more personalized service, tailored to the specific needs of your business.

The strong attorney-client relationship also fosters enhanced communication. Your Fractional General Counsel is always accessible, providing you with the advice and information you need when you need it. This level of responsiveness can help you navigate complex legal issues with confidence and ease.

Client Avatars:

The Different Types of Businesses and Their Unique Legal Needs

To understand the varied legal needs of businesses and how fractional general counsel can help, let’s take a look at some examples using three different client avatars. Each of these businesses, Sarah’s e-commerce business, John’s manufacturing company, and Emily’s tech startup, have unique challenges and requirements in the legal landscape.

What's Next in the Ultimate Business Owner's Handbook?

We’ve designed each chapter in the Ultimate Business Owner’s Handbook to serve as a roadmap for navigating the complex legal landscape of running a business. Let’s take a sneak peek at what lies ahead, and how our client avatars, Sarah, John, and Emily, will illustrate the key points in each chapter.

Overview of the Upcoming Chapters

Chapter 2: Business Formation 101 focuses on the legalities of starting a business. We’ll delve into topics such as choosing the right business structure, registering a business, and the legal requirements that come with these decisions.

Chapter 3: Essential Contract Strategies for Small Businesses provides insight into the world of contracts. From drafting and negotiating agreements to managing contractual disputes, this chapter covers essential strategies that can protect your business and its interests.

Chapter 4: Building a Legally Strong Brand explores the importance of safeguarding your business’s identity. We’ll discuss intellectual property rights, including trademarks and copyrights, and how these can protect your brand’s unique elements.

Chapter 5: Mastering Compliance: Recommended Tools and Practices aims to help you navigate the landscape of regulatory compliance. This chapter will guide you through the necessary tools and practices that can ensure your business meets its legal obligations.

Chapter 6: Litigation & Enforcement Services provides an overview of what to expect if your business faces litigation or needs to enforce its rights. This chapter offers strategies on how to handle these situations effectively and protect your business.

Chapter 7: Subscription Legal Services & Working with Tingen Law provides an overview of our unique legal service offerings and how we can assist your business in its legal journey.

How the Client Avatars Will Be Used in Each Section

Our client avatars Sarah, John, and Emily will serve as guiding characters throughout these chapters. Each business owner will illustrate the unique legal challenges their businesses face, and how the strategies discussed can be applied in a real-world context.

In Business Formation 101, we will use Sarah’s e-commerce business as a case study to demonstrate the steps involved in starting a business. John’s manufacturing company will help illustrate the intricacies of contract negotiation in Essential Contract Strategies for Small Businesses. Emily’s tech startup will serve as a prime example of the importance of protecting intellectual property rights in Building a Legally Strong Brand.

Mastering Compliance will use all three avatars to highlight the importance of regulatory compliance in diverse business sectors. In Litigation & Enforcement Services, we will delve into potential legal disputes each business owner could face and how they could navigate such situations.

Finally, Subscription Legal Services & Working with Tingen Law will use each avatar to demonstrate how our services can be tailored to meet unique business needs, ensuring a strong and proactive legal support system.

What Kind of Legal Structure Should My Business Have?

There are several types of legal structures, each with its own advantages and disadvantages.

The decision will impact your personal liability, taxation, and the cost and complexity of running your business.

Choosing the appropriate one for your business requires understanding each structure and how it aligns with your business needs.

Sole Proprietorships & General Partnerships

• Sole proprietorships are businesses owned and run by one person
• General partnerships involve two or more owners jointly running a business
• Both of these structures are straightforward to set up and operate
• A downside is that owners bear personal responsibility for the business’s debts and liabilities, which could put their personal assets at risk

Limited Partnerships

• General partners run the business
• Limited partners contribute capital but have minimal control over the operation
• In this case, limited partners enjoy limited liability while general partners bear the risk for debts and liabilities

Limited Liability Companies (LLCs)

• A more flexible option that offers limited liability protection to its owners (known as members) like a corporation, but with less formality and complexity
• A more in-depth look at this structure can be found below

Corporations

• Corporations are separate from their owners (shareholders)

1. This means the corporation can own property, sign contracts, and even face lawsuits
2. Owners’ liability is limited to their investment in the corporation, protecting personal assets

• A more in-depth look at this structure can be found below

B Corporations

• For-profit companies that want to consider social and environmental impact alongside profit
• Subject to transparency standards and are legally responsible for their impact on workers, society, and the environment

Nonprofit Corporation

• Organized to further a specific social cause or advocate a shared point of view
• Exempt from paying corporate income tax on profits made from activities related to their mission

What is the Right Tax Designation for My Business?

When setting up your business, another critical decision is selecting the right tax designation. NOTE: your legal structure and tax designation do not always match.

• For example, you might have an LLC and be taxed as an S Corp or you might have a corporation and be taxed as a partnership.

While this section provides helpful information, we recommend you speak with an accountant to ensure you select the appropriate tax designation.

Partnerships

• A tax designation where business profits pass through to the owners’ personal tax returns
• This structure avoids double taxation but comes with the risk of personal liability for business debts

S Corporations

• A tax designation for corporations and LLCs that provides pass-through taxation benefits, reducing the risk of double taxation
• In this designation, the owners’ liability remains limited to their investment in the company

C Corporations

• A separate legal entity that pays its taxes at the corporate level
• This structure leads to double taxation (corporate tax and individual tax on dividends)
• Provides several tax planning opportunities and benefits

Limited Liability Companies (LLCs): An In-Depth Look

Limited Liability Company (LLC) is considered the most popular business structure for small to medium sized businesses. This hybrid structure offers the operational simplicity of a partnership or sole proprietorship and the personal liability protection of a corporation.

Here is a detailed look at what comes with an LLC:

Personal Liability Protection

• Members (the owner’s) of an LLC aren’t personally responsible for the company’s debts and liabilities
• This means your personal assets, such as your home or personal savings, are generally protected if your business incurs debt or faces a lawsuit

Flexible Management Structure

• LLCs can have either member-managed or manager-managed setups
• This versatility makes it a popular choice for business owners seeking ease of operation

Pass-Through Tax Entity

• LLCs typically function as pass-through tax entities
• This means profit and taxes are listed on the tax returns of the owners and is taxed at individual income tax rates
• Because the LLCs themselves don’t pay additional taxes, this simplifies the administrative process for business owners

Easier Compliance Requirements

• IMPORTANT NOTE: While LLCs come with easier compliance requirements, it doesn’t mean there are none
• Basic formalities like having a written operating agreement and conducting an annual meeting to review operations are vital to maintain limited liability protection

Corporations: An In-Depth Look

Corporations are unique with their clear separation of ownership and control, which results in limited liability for shareholders. This legal structure is designed to exist perpetually, independent of its shareholders, making it a great choice for businesses aiming to attract investors.

Separation of Ownership and Control

• Shareholders in a corporation own stock but have no control over daily operations
• Safeguards personal assets, providing liability protection

Issuing Stock and Raising Capital

• 
  
• Can issue stock to raise funds
• Issuing stock enables significant economic growth and public benefit

The Corporate Structure

• Consists of shareholders, officers, and a board
• A startup founder might be all three, but it’s essential to maintain personal and business separation to prevent liability issues

Higher Compliance Burden

• Carry a higher compliance burden due to their complex structure
• Regular meetings, managing stock certificates, and maintaining clear descriptions of officers’ roles is essential

Client Avatar Example: 

Legal Structures

To help you understand how the business legal structure can influence the operations, growth strategies, and legal obligations of your venture, let’s consider two client avatars: Sarah and Emily.

In both examples, the choice of business structure is influenced by the nature of the business, the plans for growth, and the degree of formality the owner is prepared to undertake.

Compliance Requirements

When it comes to running a business, compliance is not just a recommendation—it’s a necessity. Each business structure, from sole proprietorships to corporations, carries specific legal and tax obligations.

While this section highlights key compliance requirements for different business structures, we recommend partnering with a fractional general counsel or business lawyer. That way you can ensure your company meets the appropriate compliance requirements.

Compliance for Specific Business Structures

LLCs: Flexibility with Formality

While the Limited Liability Company (LLC) offers a flexible business structure, but there are still compliance factors to consider. LLCs need to file an annual report in most states and should maintain a clear separation of personal and business finances to protect and maintain their limited liability status.

Moreover, if your LLC has multiple members, a well-drafted Operating Agreement is crucial. It provides clear guidance on how the company is run and outlines what happens if a member wants to leave the business.

B Corps and Nonprofits: Special 

Compliance Requirements

Nonprofit corporations and B Corps also have specific compliance requirements. For instance, nonprofits must ensure they operate exclusively for charitable, scientific, religious, or other approved purposes to maintain tax-exempt status. B Corps, on the other hand, must consider their broader social and environmental impact.

While not as complex as the regulations facing corporations, expert legal advice can be invaluable to B Corps and Nonprofits. Having legal counsel will assist in navigating the specific compliance requirements and preventing issues that will result in you losing your tax status.

Where Should I File My Business?

Understanding where to file your business is crucial in the formation process. It can have lasting implications on your tax liabilities, legal responsibilities, and even business opportunities.

Let’s dive in!

Registration State vs. Principal or Headquarter State

A business typically has a registration state—the state where it’s legally incorporated—and a principal or headquarter state, where it conducts most of its operations. While these can be the same, businesses often operate across multiple states or have strategic reasons for incorporating outside their principal state.

Client Avatar Example: 

Where You Should File

To help illustrate how companies decide where to file, let’s look at our two client avatars, Sarah and Emily, again.

Practical Steps: Formation & Maintenance

Business isn’t just about legal strategies and compliance; it’s about the little, practical steps that keep the wheels turning. It’s these steps that often differentiate successful businesses from those that falter.

Whether you’re just starting out or have been around for a while, these practical tips will help keep your operation running smoothly.

Formalities & Standard Operating Procedures

When starting a business, it’s common to hit the ground running, with structure taking a back seat to action.

However, as you grow and bring on more people, implementing formalities and standard operating procedures becomes vital. Not everyone can read your mind—having set processes in place makes it easier for your team to understand what needs to be done and how to do it without having to go to you for clarification or a giant mess.

For LLCs, consider at least an annual meeting to reflect on your operation, aligning with your operating agreement and ensuring your business continues on the right path.

For corporations, maintaining formalities is not just a recommendation, it’s a requirement to preserve your limited liability. Regular meetings, minute keeping, and clear record storage are all part of this.

Client Avatar Example: 

Contract Needs

To provide a practical understanding of the importance of contracts, let’s look at one of our client avatars, a manufacturing CEO named John.

Contracts Your Business Needs

Why are contracts essential for your company? Contracts are the lifeblood of any business. They set expectations and create the rules of engagement between companies, customers, employees, and suppliers.

Contracts are tools and assets that should support your business’s needs and help streamline your sales process, not hinder them. In the busy world of business, you need several types of contracts to operate smoothly and protect your interests.

Industry Contract Example: Agency

If you’re an agency, your contracts are vital for defining the scope of work, timelines, responsibilities, and importantly, the ownership of intellectual property. Agency-client contracts often include confidentiality and non-disclosure clauses to protect sensitive information shared during the collaboration.

Other Industry Contract Needs

Different industries have different contractual needs:

Tech companies need to prioritize contracts focusing on intellectual property rights, software licensing, and user agreements. 

In retail, agreements related to supply, distribution, and returns are critical. 

Consulting firms need detailed service agreements outlining the specifics of the consultation services provided, payment, and confidentiality.

Remember, it’s not about having a contract; it’s about having the right contracts. Your contracts should be as unique as your business, reflecting your specific needs, and addressing industry standards. Crafting these essential contracts ensures you’re not just going with the flow but actively protecting and steering your business towards success.