You go to school for years, perfecting job skills.
You learn to compute complicated math formulas. You can design cool Web sites
Or in the case of Liz Cuttino, you spend four years in veterinary school learning to care for horses.
But those classes do not teach you how to start a business.
“There’s very little guidance in school,” Cuttino, 25, said. “In four years of school, we had one six-week course for practice management. Truthfully, in my experience, I didn’t know where to look for all the legal things.”
The business world’s legalese can be confusing. And there are a multitude of local, state and federal laws regulating what you do.
There’s help, whether needed for sorting out the language in a contract or figuring out what kind of business you are. For simple questions, online resources such as the S.C. Secretary of State’s Web site can be a big help.
When it comes to hunting for investors, creating inventions or interpreting lengthy contracts, an attorney can help businesses stay out of trouble.
FIRST THINGS FIRST
Bob Pettit, a consultant at the Small Business Development Center of South Carolina, helps hundreds of entrepreneurs form companies.
“Everything you do is based on the type of business you set up,” Pettit said. “It’s one of your first decisions.”
Clients have several choices in forming a business, Pettit said.
In a sole proprietorship, getting started is as basic as putting up a sign and getting to work.
“There’s practically nothing to do but get a business license,” he said.
But Pettit recommends a little more sophistication. Form a limited liability corporation, or LLC, he said.
In South Carolina last year, 81 percent of all new businesses formed as an LLC, said Andrew Rogers, an attorney with the Small Business Law Firm of Payne & Associates.
An LLC provides a liability barrier for the owner in case someone sues the business. The owner’s personal assets would not be at risk. At the same time, an LLC allows for flexibility with tax filings.
Jacque Riley, who started Riley Communications in September, chose to form an LLC to get that added layer of protection.
“It was simple to set up,” she said, “but it set up a barrier for me if things went wrong.”
One thing to note about an LLC: Under S.C. law the business dissolves upon the owner’s death. However, Pettit said, that mandate can be avoided by including a statement in the membership agreement saying it will not be dissolved.
Other corporate formations become more complicated, especially when the new owner wants to sell shares or include investors or multiple partners with different levels of liability.
Bill Park, founder of Sabal Medical Inc. in Charleston, invented a medical cart that allows nurses to scan bar codes on patients’ wrist bracelets and on medications to ensure accuracy in doses. Sabal started as an LLC in January 2006 but turned into a C Corp in May because he is selling shares in the company.
Park spent about $25,000 on legal fees to develop investor memorandums and articles of incorporation and to file the proper paperwork with the federal government and in states where he recruits investors.
“I’m at the point where I need to build a product and not worry about filings in South Carolina,” he said.
When searching for legal help, Pettit said, new business owners should ask around the community to find out who could help. It’s best to find a lawyer who has experience helping similar businesses.
For example, Cuttino consulted with a lawyer who has assisted other vet practices, while Park chose a Seattle firm because it has a good reputation with tech startups.
“The comfort level is the big thing,” Park said.
Even if someone is opening a small business with limited financial resources, Pettit suggests a consultation with an attorney. In the Columbia area, people should expect to pay $100 to $160 an hour.
“A lawyer is worth the time and money spent in talking to them an hour,” Pettit said.
WHAT’S NEXT?
Once a new business owner sets up her corporation, pending legal snares depend upon the business.
There are a host of federal and state employment laws, but the size of a company determines whether it must comply with them, said William Floyd, a specialist in employment law at Nexsen Pruet in Columbia.
For example, he said, anti-discrimination laws do not apply if a business employs five people.
Other employment laws are triggered once a company reaches 20, 50 or 100 employees.
“If I were a small business person,” he said, “I would do my homework.”
That would include checking with the South Carolina Bar Association, the Small Business Administration and other groups to learn about seminars for small business owners.
Small businesses that deal with contracts also might need legal consultation.
An attorney can help draft a contract that can be used repeatedly, Rogers said. His firm creates legal documents that have blanks for business owners to fill in prices, dates and other details.
Floyd cautions business owners against using forms found on the Internet.
“You’d have to be very cautious before you use anything like that,” he said, “because you don’t know if that generic contract will meet your legal needs in South Carolina.”
When it comes to protection from lawsuits, businesses carry insurance. The insurance should cover legal fees, Pettit said, and even provide attorneys to defend the case.
GOING HIGH TECH
As South Carolina furthers its mission to develop a high-tech, knowledge-based economy, more and more entrepreneurs will need legal help in protecting their intellectual property rights.
Frank Greer needed help protecting a patent on a portable device for instant messaging. His Greenville company, Zipit, created the product so teenagers can send instant messages from a hand-held device rather than tying up the family computer.
Greer’s company also needed legal counsel to help it spin off from a parent company.
“It’s very time-consuming,” he said, “but it’s important to set things up properly.”
The two companies needed to figure out licensing and how to transfer technology, software and hardware.
“The issue of being a spin out is even more complicated,” Greer said. “There’s a variety of ways to slice it and figure out what’s best for everybody.”
SCLaunch, an organization that funds technology startup companies, can offer some guidance through the process, said Dave McNamara, SCLaunch director. The organization works through universities, which have intellectual property offices.
“We will help fledgling companies that need their intellectual property protected,” he said.
Park, the medical cart inventor, hired an attorney to do a patent search to make sure his invention did not duplicate someone else’s work. He also needed legal help in negotiating contracts with hospitals and in working out a licensing agreement with his former company.
“I needed a professional to really watch my back.”
Reach Phillips at (803) 771-8307.
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