Do you suggest I trademark my company name? Also, is trademarking something I can do or do I need to hire a lawyer?
Filing for a trademark is a relatively inexpensive process. If your company name or a product name is unique it is something you may want to do. From the viewpoint of an attorney, risk-averse and looking to maximize protections, a safeguard like a trademark always sounds like a great idea if you have the budget for it. The process can take some time, in some cases a year or more, and requires the “mark” your company name or logo being published in a federal publication with a period of time for anyone to oppose the mark before it finally becomes yours. There are certain requirements, such as using the mark in the “stream of commerce”—basically being an active business within a certain time of applying for the mark. There is a lot of information on the U.S. Patent and Trademark Office’s (USPTO) website (www.uspto.gov) and you can even apply online. Some states also allow you to register a trademark within the state as well.
You do not need an attorney to file a trademark and many entrepreneurs do it on their own. It can be helpful to have an attorney at least look over your application. One area where an attorney can be typically helpful is in determining the filing class. A trademark or service mark is only good for the industry class it is filed for. You can file for multiple classes and each will cost a separate filing fee. It can be hard in certain instances to narrow it down to one and several may apply to your business.
A simple and typically cheaper way to achieve the similar protection if you intend to only operate within your state or your county is to file for an assumed name sometimes referred to as an assumed name or D/B/A (doing business as) certificate. In a state like Texas the assumed name registration prevents anyone from taking that name in the counties it is registered much like registering your entity prevents another entity from registering with your name.
I am looking to start my business. What are the first legal steps I should take?
When starting a new business, the first “legal step” is to decide what business structure you want to have. If you begin running your business without filing proper documents with the responsible state agency (typically your secretary of state), your business will be considered a sole proprietorship. This legally means that you are personally liable for the acts of the business and when someone sues the business they can take the business’s assets and yours. Different states may have different variations on the business forms, but the common basic forms that limit your liability are the limited partnership, limited liability company, limited liability partnership, and corporation.
Often, your state will have an explanation of the forms. Many people choose to form a business entity based out of Delaware because the state has a very well-defined corporate law which helps to eliminate some risks. The Delaware C-Corporation is one of the very popular forms. However, for most businesses, you are initially best served forming an entity in your state. The LLC is typically the most popular entity because it is the most flexible and lets you choose whether to be taxed as a corporation (taxed at the business level then personally on payouts from the business) or like a partnership (what is called flow-through taxation where the profit is taxed as personal income). Looking specifically at your state’s definitions, requirements, and terms is very important. In some states you may have additional benefits, i.e. a Texas LLC does not pay state income tax until it hits a certain point of profitability. Each form of business has its own requirements, benefits, and hindrances.
While you create your entity with a state you will need to get your Employer Identification Number (EIN) from the IRS. It’s free, takes minutes, and will avoid you needing to use your personal Social Security Number for the business. From there, register your trade name—many states, counties, or cities may require you to do this if you are not operating under your own name. In most states if you create a business entity and operate under its name you do not need to do this. You should also look into any business licenses or permits you may need to have—these are typically at the county or city level. See if there are any tax forms you need to fill out—some states require you to fill out a business person-property tax form. Most of the time once you have filed your business entity the state will send you follow up communication to help you get properly registered for taxation.
Summarizing legal steps (there are very important practical and accounting steps all in between): (1) determine what business entity suits you best; (2) file for the entity; (3) Get EIN; (4) register trade name if necessary (also note you can always “do business as” basically changing your name for the purpose of doing business, so don’t obsess over the initial name and let it stop you from getting started); (5) fill out tax forms as necessary; (6) look into any state, local, or business licenses you need to get; and (7) respond to any follow up information or required action your state makes you aware of.
I currently have a LLC in Texas, however I am moving to North Carolina next year. Do I keep it in Texas and pay Texas taxes or create a new one in North Carolina?
This is a specific legal question that I strongly urge you to find an attorney in North Carolina to advise you on the tax and legal ramifications in that state. I think a big part of your consideration will be based on what type of business you run. If you are an online store or service provider, it typically doesn’t matter to you where you are based. In that case, as an entrepreneur you are most likely best served by being an entity of the state with the best tax benefits for you. Texas is extraordinarily business-friendly on the tax front and will likely be the one you go with after researching to confirm that. If you are a brick and mortar operation, it is probably more likely in your interest to reform in North Carolina—though registering as a foreign-entity to conduct business there is likely an option as well.
The things that you should be aware of and thinking about are: (1) your type of business and how moving affects it; (2) requirements for maintaining the entity in either state, i.e. if you remain in Texas you will have to keep at least a registered agent, if not a physical office (depending on the type of entity); (3) the tax benefits to you of your options; and (4) the laws that you are subject to in either state that may affect your business depending on where you are registered as an entity. Do not rely on my answer here. While you could certainly do research to find answers to these questions a lot of your time would be saved and you would have greater certainty on the legal side by purchasing a little bit of attorney time to review some of these points.