Entrepreneurs with ideas for a product or service face many challenges when bringing their ideas into the marketplace. Careful legal planning can make these challenges easier to face.
Startups
A business startup is a company that is in the beginning stages of business. Their small size and lack of financing present particular challenges in business and commercial law.
These companies or ventures typically focus on a single product or service that their founders want to bring to the marketplace. They usually lack a fully developed business model and capital.
Important factors
Location is essential and depends on the product or service being offered. Business may be conducted online, in a traditional workplace setting, a home office or in a store. The importance of its physical appearance to the public needs consideration.
Startups have different business structure options. A founder who will be a key worker in the business may want a sole proprietorship. Several people who will have joint ownership may want to classify their business as a partnership. A limited liability company is a somewhat more formal business format that can protect the owners from personal liability for company debts.
Funding
Funding is essential. Most startups are funded by their founders. They also seek capital from their family, or friends. Professional investors or venture capitalists may also provide funding. Private investors may invest seed capital in research and developing business plans.
Crowdfunding is a new funding method. Entrepreneurs set up an online crowdfunding page where people can donate money.
Startups with perfect credit history may use a line of credit for financing. But this financing poses more risks.
Other companies seek small business loans. These may include a microloan which is a short-term and low-interest loan product designed for startups.
The U.S. Small Business Administration gives microloans to small business. Its average loan is $13,000 and the maximum loan amount is $50,000. Nonprofit community lenders provide these SBA loans.
Advantages and disadvantages
Compared to some established companies, startups may have more flexibility and more employee interaction. But like other businesses, startups have mixture of advantages and disadvantages.
Other advantages can include:
- More learning opportunities
- Greater responsibility
- Flexible hours and work location
- Better benefits
- Encouraging innovation
Disadvantages may involve:
- Greater risk
- Need to raise capital
- Higher stress
- Longer work hours
- More competitive business environment
- Delay with achieving profitability
- Addressing investor concerns
Launch
A startup must address these issues before it opens its doors or website:
- Developing an idea
- Market research on the idea’s feasibility and its marketplace demand
- Creating a business plan addressing company structure, its goals, mission values and objectives
- Obtaining financing
- Business registration
- Obtaining required licenses or permits
- Establishing a business location
- Developing an advertising plan to attract customers or clients and establish a customer base
Attorneys can help form a business meets Texas legal requirements. They can assist entrepreneurs with overcoming legal obstacles.