9 Steps to Legally Protect Your Business, Part 1

This is part 1 of a 3-part series that covers 9 steps to legally protect your online business. This episode will help you avoid accidentally infringing on someone else's trademark with your business name and protect your personal assets from the risks of doing business.

Download the free guide accompanying this series at artfulcontracts.com/legalchecklist

Key Takeaways

1. Make sure your business name is available in your state and is not already a registered trademark before you go all in on your branding and marketing.
2. Be intentional when choosing your business entity. By default, your business is a sole proprietorship and you have zero liability protection. If you have personal assets you want to protect, consider forming an LLC.
3. Get an EIN from the IRS. If you have an LLC, this is not optional. If you're a sole proprietor, it's a great option to keep your Social Security number private.

Resources Mentioned

• Download the 9-Step Legal Checklist
• Search your business name using TESS
• Companies that will help you form your LLC (affiliate links): IncFile, Harbor Compliance, ZenBusiness
• Get an EIN from the IRS
• Watch the free masterclass
• Follow Amy on Instagram @artfulcontracts

Next Steps

Thank you so much for listening! If you enjoyed this episode, please reach out and let me know by sending me a DM on Instagram @artfulcontracts

Here are a few other steps you can take to support the podcast:

• Leave a review on Apple Podcasts
• Subscribe on Apple Podcasts, Google Podcasts, Spotify, or Stitcher
• Share the episode on social media and tag me @artfulcontracts

Episode Transcript 

Hello, hello. We are starting off this podcast with a bang. I am coming to you today with the first in a series of three. This is a special series that I'm building out just for the beginning of this podcast because I wanted to give you a really awesome resource while we get started. So this episode and the next two episodes are all about the nine steps that you can take to legally protect your business from day one. And if you've already started your business, this is a great time to go back and just go through this checklist and make sure that you've got it all covered.

Hey, I'm Amy Nesheim, licensed attorney for online business owners and founder of my own business, Artful Contracts. You're listening to Legal Made Easy, the show that makes the legal aspects of online business easy to understand and implement so you can grow your business with confidence knowing you've got it all covered. Let's dive in.

So this first episode is going to be on the first three steps and then another episode on three steps. And I think you get the idea. There's gonna be three episodes with three steps each of this nine-step checklist. And if this is something that is helpful for you, I also have a written guide to go along with this that has all the steps written out for you. So you don't have to take notes, you don't have to memorize them. Go to artfulcontracts.com slash legal checklist, one word legal checklist to download this checklist that goes along with this three-part podcast series. All right, that's enough of that. We are going to dive into the first three steps out of these nine steps.

So, step number one is choosing your business name. Now, if you've already chosen your name, don't skip past this. This is still really important for you. So, first up, choose your business name. This is important, but at the same time, I also don't want you to get hung up on it. It doesn't have to be complicated. It could be as simple as just your name or your name plus your service. So something like Jenny Smith Life Coaching, or it can be something that just describes what you do, or even something totally random, right? Something that just means something to you personally. That's that works too.

The legal piece of it comes in when making sure that you aren't accidentally copying someone else's name. And there's two reasons for this. Number one, if the name is already taken by someone else in your state, then you can't use it to register your LLC or register a trade name or DBA. That's going to be one of the next steps, so I'll talk about that more then. But you have to know if the name is available before you can even register it as an LLC or as a trade name.

So if there's something too similar already registered in your state, you won't be able to use it as your LLC name or as your DBA or trade name. And the second reason that this is really important is you want to make sure that you're not accidentally infringing on somebody else's name that they've already trademarked. Someone else could have trademarked the business name that you want to use. So if you go all in on using this business name that you really like and you set up all your branding and your website and everything, you could face a cease and desist letter from that business that has already trademarked this name saying that you have to take it all down and start over. And that is heartbreaking and it's also a lengthy and can be expensive process depending on how much you invested in your branding.

So the way that you make sure that your business name is available is come up with a list of, you know, your top three, top five, or something, and then start Googling. Google your top name and see if there are any other businesses that have the same name. And if there are, check to see what services they provide and where they are located. Are they geographically close to you and do they do the same thing that you do? So if you're a life coach and they are a pet grooming service, it doesn't really matter, right? And I also recommend that you dive deep into Google for this. Don't just look at the first couple pages because somebody can have the name and just not rank very well in Google, right?

And then the next thing to do is to check your state business registrations. So this is the piece I was just talking about of making sure that no one else has already registered, the LLC or trade name. The way that you do that is to Google the name of your state plus business name search. So for example, New Hampshire Business Name Search or Illinois Business Name Search. And what you're looking for is the.gov website for your state. It's usually gonna be the Secretary of State website, and you will probably have to scroll past a bunch of ads for services that say that they can do this for you, but they're gonna charge you. And you can do it for free or for a very small amount on the state website.

So go to the dot gov website and that will allow you to search all of the business registrations in your state. And so you can type in the name that you chose and see if anyone else has registered the same thing. And I also recommend searching things that are similar as well, like variations on your name, because if it's too close, you also won't be able to register it. States are not very strict about what's too close, so usually if it's only off by an S or a the or something like that, then it's too close. But states have specific guidelines for that, and that's usually in the LLC or trade name registration documentation. They'll tell you how close is too close.

And then the next step, once you figured out that it's clear in your state, is to check the federal trademark database because you want to make sure that no one else has registered that name as a trademark, because then you are infringing on their trademark if you use it and they could sue you for that. Or at a bare minimum, send you a letter that tells you you have to totally rebrand your business. So the way you do that is by checking the Trademark Electronic Search System. That's a database and search software that was put together by the United States Patent and Trademark Office. And it's not the best tool in the world, but it will give you back exact results.

So the link for that is in the show notes, or you can Google Tess T E S S Trademark Electronic Search System. And again, it's a.gov site. So make sure you're clicking on that and not any of the ads or paid uh options because it is free. So type in your business name in there and make sure you definitely type in variations because trademarks have a lot broader protection than just registering an LLC or a trade name.

So something can be not that similar but still infringe on the trademark. So, for example, if you have a mark that is, if your business name is three words long and the middle word is different from somebody else's, that could still be a violation of that person's trademark if it's so similar that people would be confused. So type in a few variations on your name that are, you know, maybe one word off or two words off, or that they sound the same, but they're spelled different to make sure that your business name that you chose is not infringing on someone else's trademark. Now that's not going to be a perfect option because, like I said, the test search software is kind of limited. So if you want to be super safe, you can hire a lawyer to run a comprehensive trademark search for you, but that may not be an expense that you're ready for yet. So just doing that search is obviously better than nothing.

Okay, that was step one, choosing your business name. Now that you're all set on that, the next step is to create your business entity. The term business entity is just a fancy word for the legal structure of your business. So small business owners have basically four options: sole proprietorship, LLC, partnership, or corporation. So the default for every business with one owner, if you don't do anything to register your business or anything to make it official, it is a sole proprietorship. If you register a DBA or a trade name, it is still a sole proprietorship. That doesn't change the legal structure of your business.

If your business has two or more owners, by default, the business is a partnership. For an LLC or corporation, you have to affirmatively make the choice to form the business entity and file paperwork with your state. And I'm sure I will do other podcast episodes getting more in depth on this, but your business entity is important for determining your liability. So what you are personally responsible for in your business.

So forming an LLC is really important to separate what it does is separate your personal assets from the risks of doing business. It puts up a legal wall in between you and your business so that if you ever get sued in your business or have debts in your business, they cannot come out of your personal bank account. They can't come out of your personal money.

So that means if you have any personal assets that you want to protect, like a house, a car, savings, retirement, anything that you own, and you want to make sure that it is safe from the risks of doing business, an LLC helps you do that. And on the other side of that, if you have any risks in your business, if you sell high-ticket sales, if you sell high volume of sales, if you are going to be doing anything in the health sphere or giving advice to people when you are not a licensed professional, for example, like a financial coach or a health coach, or if you do what I do, then those are all great reasons to form an LLC.

A corporation is another option, but I generally recommend an LLC over a corporation for someone who's just starting on their entrepreneurial journey because corporations are more complicated to run. There are more strict requirements about how you manage them and they are more expensive to run. So it generally is not important unless you are trying to get investors. An LLC is usually the best option for a small business owner.

Like I said before, to form a sole proprietorship, you don't have to do anything. Just by operating your business, you are a sole proprietorship. If you choose an LLC, if you want that liability protection, you have to form the entity, you have to register the business with your state. So you'll have to fill out a form that's usually called articles of agreement or a certificate of formation. And you have to pay a filing fee to the state that can vary widely depending on what state you're in. The lowest I've seen is around $50. The highest is California coming in at $800. So that decision of whether to form an LLC right at the beginning is a pretty personal one because it depends on how much money you're willing to invest right at the beginning, what the fee is for your state, and you know how a risk averse you are.

I mean, I recommend starting at the beginning. I, me personally, I formed my LLC before I had a website, before I had a solid business plan. The LLC was the absolute first thing that I did, and then I felt secure to move forward into everything else. I I think it was a solid month between when I formed my LLC and the first social media post I did for my business. But that's not saying that you have to. I just knew that I'm doing a business that has a little bit more liability involved, and I own a house, so I wanted to protect my house. But if you don't have the cash up front to form the LLC, or if you are starting out really slow and you don't think there's a lot of liability in what you're doing, maybe you're okay with waiting.

Forming an LLC is absolutely something that you can do yourself on your state's.gov website. You can just Google LLC formation and your state and skip past the ads to the.gov website. And most of them have great instructions on what to do, and the forms are available there for you, and you just have to submit them following the instructions. Now I know there are people who would rather have someone else do it just to make sure they don't skip any steps or do anything wrong. So you can have a local attorney do it for you, or there are lots of services that can help you navigate the forms. I have links to a few of the services that I trust in the show notes.

One more note on the end of this is that if your business name is different either from your legal name, if you're a sole proprietor, or from your LLC name, then you have to register your business name with the state as a trade name or doing business as DBA, fictitious name, assumed name, those words all mean the same thing. You have to register that name, the business name, with either your state or your county, and that depends on exactly where you live, either your state or your county as a DBA or trade name. So you only have to do that if your business name, the name that you put out into the world, the one that goes on your website, the one that people recognize you by, if that's different from your legal name of your business.

So as a sole proprietor, the legal name of your business is your legal name. So if you use anything other than your legal name to do business, then you have to register a DBA for your LLC. If you use anything other than your LLC name that you put in your formation documents as your business name, then you would have to register that business name as a DBA. Sometimes people use just their full name, LLC, like Amy and SIM LLC as their LLC name. If I did that and then went around telling everyone my business was Artful Contracts, I would have to have a DBA for Artful Contracts. And if I didn't have an LLC at all, I would also have to have a DBA for Artful Contracts because Artful Contracts is not my legal name.

Alright, that gets us through step two, and now we are moving on to step number three. Step three is requesting a tax ID number from the IRS. This tax ID number is going to be called an EIN, an employer identification number, and it has nothing to do with whether you're an employer or not. So just ignore that part. It's just like a social security number for your business. It's the number that your payment processors, your bank, potentially your clients need to report transactions with you to the IRS. It is super easy to get one. It's free on the IRS website. You can just Google getting an EIN and again skip past the ads and go to the IRS.gov website, and it's easy to do.

If you formed an LLC, if you chose LLC as your business entity, this step is not optional. You will need an EIN to open your business bank account and you'll need it to give to your payment processors. And this is true even if you had an EIN, like if you operated as a sole proprietor for a while before getting your LLC and you had an EIN as a sole proprietor, you have to get a new one for your LLC because it's like I think of it as a new baby being born. The business is a new, brand new legal person, they get their own tax ID number. You can't just transfer over one that you had before. If you're a sole proprietor, you might not need an EIN. You can just use your Social Security number, but an EIN is useful for privacy because you are going to have to give companies a number, a tax number to associate with you. And a lot of people aren't comfortable handing out their social security number like that.

So you can apply for an EIN and then you can use your EIN when people need a tax number for you. And it's still associated with you personally, but it's not your social. On top of that, if you were located in New York, South Carolina, or Massachusetts, you also have to get a separate state tax ID.

All right, that got us through the first three steps of my nine-step checklist to start your business. Again, remember that you can download this checklist in written form so that you don't have to take notes, you don't have to memorize it. Just go to artfulcontracts.comslash legal checklist to download that. And we'll be back in the next episode with the next three steps to legally protect your business.