The SBA Suggests 10 Key Steps for Starting a New Business

Once you’ve decided to start a new business, it can be tempting to simply moved forward with various tasks as they come to mind. While this may work for a few entrepreneurs, it’s always best to create an organized plan of action so you won’t waste time and cause problems for yourself that could easily have been avoided.

Fortunately, the SBA (Small Business Administration) provides excellent online materials that can help you plan the most useful way to start a new company – or expand the current reach of an existing one. Here’s a brief review of the ten important tasks that should normally be addressed first as you launch a new business.

The key steps for creating a solid foundation for your new business

  1. Decide where to locate your company. Prior to starting any market research, you’ll need to look at several cities to decide upon the best location for your business. This decision must be partly based on if you’ll be selling goods and services to your customers from a brick-and-mortar storefront or office – or if you’ll just be contacting potential customers on the phone or over the Internet. Be sure to select a location where many well-qualified job applicants live – as well as a city and state with reasonable business taxes;
  1. Develop a reliable market research plan. Once you’re certain about the goods or services your new business will sell, you must conduct market research to verify that there’s a definite need for what you’ll be selling in a specific location. This activity also involves identifying your potential customers and all known competitors; 
  2. Create a viable business plan. Most people starting a new business choose between a traditional business plan or a lean one for a basic start-up company. If you need to borrow money to finance your company, you’ll almost certainly have to provide a lender with a traditional business plan.

The traditional plan is normally very comprehensive – it describes your specific goods and services, provides a mission statement about what you seek to accomplish in the long run and names the initial team of professionals who will be running the company. It also states where the business will be located and how many employees you’ll need to hire. A traditional business plan should also describe the business structure you’ll be using, who will be handling specific tasks – and it should review your market analysis. Initial financial projections or earnings for the company should also be included.

In contrast, a lean start-up business plan may simply describe your goods and services, provide a statement about who will be running the company and state who you believe will be your most likely customers. It should also contain information about how you’ll initially finance the company and where it will be located;

  1. Make sure you have enough initial funding for the company. You and your business partners or advisors must determine how much money you’ll need to start your business. If you cannot raise this money among your business partners, then may have to try and obtain funds from venture capitalists or request a small business loan from a bank or through SBA resources. Other options include raising capital through crowdfunding or other online resources;
  2. Select the best business structure for your company. While many people run sole proprietorships if they’ll be handling all of the major company tasks themselves, others choose between forming such structures as partnerships, limited liability companies (LLCs) — or some type of corporation or cooperative;
  3. Decide upon the best name for your company. It’s a good idea to brainstorm with your partners or investors since you want to try and choose a name that clearly reflects the nature or “brand” of your business – as well as its spirit. Be aware that one of your first tasks will be to make sure the name you select is original and that it’s not already being used by anyone else;
  1. Be sure to register and protect your business name. After you’ve chosen the best name for your company, you’ll need to take steps to protect that name by properly registering it. Keep in mind that you may also need to register any trademark you’ll be using. Since additional ways of protecting your company name may also be required, you should always discuss this topic with your Houston business law attorney;
  2. You must request state and federal tax IDs. You will need to obtain an EIN (employer identification number) for many reasons. For example, you must have an EIN to open a bank account for your company and to pay taxes (among other tasks). Depending on the different states where your company will be operating, you may also need to obtain one or more state tax IDs;
  3. Obtain all required licenses and permits. Your specific type of business activity and where you’ll be working will determine the types of permits and licenses you must obtain, if any;
  4. Be sure to open one or more business accounts for your company. These most often include checking and savings accounts, credit card accounts and a merchant services account. Depending on the nature of your business and its initial size, you may be able to simply start with a checking account and then open other accounts as the need arises.

Please feel free to contact one of our Murray Lobb attorneys for legal advice as you address any or all of the various steps named above while starting a new business. We’ve had the opportunity to help many clients establish a wide variety of successful businesses in the past and are prepared to provide you will all the guidance you may need.

Obtaining an SBA Loan for Your Company

Although the SBA (Small Business Administration) doesn’t directly lend money to owners of small companies, it does create loan guidelines for general lenders, community development organizations and micro-lending institutions that partner with it. The SBA helps reduce the risks for these lenders as they select the most qualified small businesses seeking help.

SBA-guaranteed loans are designed to offer competitive fees and rates and applicants are usually offered helpful counseling during the application process.

You’ll know when you’ve found the best loan offer since it will provide you with one or more of the following benefits.

  • The need for little or no collateral
  • Flexible overhead requirements
  • Lower down payments

Although the stated reasons for securing a loan can vary, many companies seek loans to help them secure long-term fixed assets and basic funds to run their businesses. However, under certain circumstances, the amount you can borrow may be restricted based on how your company intends to use the money.

SBA loan funds are often sought for the following types of working capital and fixed assets

  • Revolving credit
  • Seasonal financing
  • Export loans
  • The refinancing of current business debt
  • Machinery
  • Real estate
  • Construction
  • Equipment
  • Remodeling

What types of eligibility requirements must be met to obtain a loan?

Lenders often first inquire about the parties holding ownership interests in the company, how it generates income and where it conducts business. They also inquire about the basic size of your business – based on the company’s number of employees, average annual receipts and other factors.

Of course, your ability to repay the loan is of keen interest to lenders, along with having a very secure business purpose. While a strong credit rating is highly desirable for obtaining loans, if you’re running a new company, certain start-up funds may still be made available to you.

Keep in mind that all lenders are entitled to establish their own, supplemental eligibility requirements for making an SBA-guaranteed loan – and they’re also entitled to ask about the following information.

  • If your company is properly registered and currently eligible to do business;
  • Whether your business is currently operating in the United States or one or more of its territories;
  • If you can easily document the time and money each business partner has already invested in the company;
  • If you can provide evidence of any recent, unsuccessful efforts to secure a non-SBA loan.

Can small companies operating as exporters of goods obtain loans from the SBA?

The SBA does try to help such companies. However, you’ll need to usually start your search for a possible lender by first contacting an SBA International Trade Specialist or the group’s Office of International Trade. Exporters often need help securing additional funds to cover their daily operating expenses, placing advance orders with suppliers and debt refinancing.

How should my company go about looking for a specific SBA-affiliated lender?

You’ll first need to spend five to ten minutes answering questions on the SBA website concerning your company’s present needs. You should then receive an email matching you to one or more interested lenders. It is then up to you to contact each potential lender to discuss possible rates, fees and other factors involved with structuring a loan. You’ll then need to submit applications and wait to receive responses.

If you do not receive any offers that you believe are favorable or viable, you can ask to speak to an SBA counselor again to see if there’s a better way for your company to try and secure the type of loan you need.

Please feel free to contact one of our Murray Lobb attorneys so we can provide you with further advice about obtaining business loans through SBA programs, private banks — or other reputable sources.

Small Businesses Often Make Crucial Legal Mistakes

Even highly competent employees sometimes make serious legal errors while handling human resource, management, accounting and other business tasks. Since federal, state and local laws are constantly being updated, you must regularly speak with numerous employees to be sure they’re making timely and lawful decisions.

Should the feedback you receive concern you, it’s always best to consult with your Houston business law attorney to be sure you know how to promptly correct any possible errors. Lawsuits are often filed over very basic legal mistakes.

What are some of the most common legal errors that businesses keep making?

Most mistakes are made when employers try to be flexible with their rules. While compassion can go a long way toward helping you get along better with your employees, clarity and consistency are crucial. Always exercise caution when addressing the following issues.

  1. Each employee must be properly classified. You need to look at each position separately, based on all pertinent state and federal laws. If you simply decide to treat everyone as an “exempt” employee, you might be sued if you fail to provide proper overtime pay or adequate rest periods.
  2. Lunch breaks must be provided when required by law. Some employees may be entitled to a meal break after completing a specific number of hours during a shift.
  3. Make sure you’re properly labeling workers as either employees or independent contractors. You may hear from the IRS if you make this type of mistake. Take the time to speak with your lawyer about how you should carefully interact and communicate with independent contractors. Once a worker has strong legal grounds for believing that “employee” status has been conferred, you can be sued for specific benefits.
  4. You must be sure all employees understand what constitutes “sexual harassment.” If you’re sued in this field, one of your strongest defenses will be that you promptly trained all new managers and employees to help create a healthy work atmosphere. You must also develop a secure way for employees to submit complaints before problems escalate.
  5. You cannot punish or fire an employee for simply taking a leave of absence under the Family Medical Leave Act (FMLA). To protect yourself, keep accurate records of all employee evaluations being conducted at routine intervals. If you’re particularly concerned about the behavior of someone taking FMLA leave, ask your attorney when you should sit down with that employee to discuss why you’re carefully monitoring their work performance – before letting them go.
  6. Be sure to issue final paychecks on a timely basis to all employees who are leaving. Find out if you’re required to provide this type of check even before an employee has returned all employer-provided equipment, vehicles or other materials.
  7. You must handle making loans to employees in a very careful manner. While this is often a kind gesture, you must set up a formal repayment schedule. Never simply deduct a portion of what’s owed from each future paycheck.
  8. Be sure to properly handle all employer obligations under the Americans with Disability Act (ADA). You may need to make appropriate work accommodations and should always treat such workers fairly. Most disabled workers take great pride in being highly dependable and productive workers.
  9. COBRA healthcare coverage must be offered and administered properly. Give serious thought to creating a comprehensive package of this medical insurance paperwork so that it’s immediately ready to be given to qualified employees when they leave. Timing is critical so potential coverage won’t lapse.
  10. The Health Insurance Portability and Accountability Act (HIPAA) must be explained and handled appropriately. Employees have a right to privacy regarding their medical data and information – be sure you’re adequately protecting it while processing claims.
  11. Pension concerns must be addressed in a timely and proper manner. The Employee Retirement Income Security Act (ERISA) is a complicated law that requires extreme attention to detail. Always request legal advice when uncertain how to administer it.
  12. You must carefully handle all responsibilities under the Consumer Credit Protection Act (CCPA). You may need expert help calculating all your employees’ paycheck deductions for lawful wage garnishments – including those for child support and student loans. Look for highly respected software that may help your most experienced workers.
  13. Equal Pay Act. This law must be carefully followed since too many businesses keep failing to pay men and women fairly when handling similar work.
  14. Title VII concerns. Your company must avoid discriminatory practices when hiring, laying off and firing employees. Many businesses are learning to use multiple interviewers with highly diverse backgrounds so that fairness can be readily achieved.
  15. OSHA laws. You must make sure to keep adequate records covering all workplace accidents and injuries for an appropriate number of years — if you employ ten or more workers.

Should you have any questions about these topics, please contact your Murray Lobb lawyer to discuss your concerns. We have extensive experience providing legal advice to our clients so they can can readily comply with all federal, state and local laws.

Six Basic Types of Business Insurance You Might Need

Successful companies of all sizes readily address their insurance needs so they won’t later be caught off guard by either a baseless or valid legal claim. No matter how hard you try to provide flawless products and services to the public, there’s always a chance that a defective product or business transaction may render you liable for legal damages.

Although only certain types of companies must carry workers compensation, disability and unemployment insurance to meet federal guidelines, all businesses can benefit from protecting their company assets by purchasing basic and special types of business insurance.

Fortunately, there are only six basic types of business insurance that you and your business partners must carefully review while trying to protect your company against future legal challenges. All six are set forth below with additional information.

Six common types of business insurance

Before reviewing the following types of insurance, be sure to thoroughly discuss the precise nature of all your business transactions with your insurance agent.

  1. General liability insurance. This will provide you with legal defense support for a variety of alleged wrongs. For example, your company may be sued based on a personal injury claim or the alleged statements of one of your employees. For example, if one of your customers is seriously injured while visiting one of your offices or factories, this policy can help you compensate the injured party for all bodily injuries and medical expenses. In addition, this same type of policy could protect you if a court holds one of your employees liable for business libel or slander — for damages up to the maximum amount of coverage stated in your policy.
  2. Product liability insurance. Even some of the most reliable products on the market will occasionally malfunction and harm a consumer. For this reason, you must secure an ample amount of product liability insurance coverage for this type of claim.
  3. Professional liability insurance. If your company provides any types of services to customers, you must carry this type of policy – often referred to as “E and O” (errors and omissions) coverage. This policy will cover the costs of defending your company in a civil lawsuit that may be based on the alleged grounds of malpractice (often medical or legal). The insurance industry doesn’t view these types of claims as eligible for coverage under either general liability insurance or a homeowner’s insurance policy.
  4. Commercial property insurance. Industrial fires, floods, windy hail storms and other natural disasters can quickly destroy critical manufacturing plants, office buildings and valuable inventory. Always be sure to carry ample coverage under this type of policy — based on recent property value appraisals.
  5. Home-based business insurance. This type of policy is usually offered as a rider to a person’s homeowner’s insurance. It provides limited coverage for such problems as business equipment and inventory damages. This type of policy can also provide funds to cover liability claims brought by injured third parties.
  6. A business owner’s policy. This general type of coverage can let you bundle nearly all (or most) of your insurance needs into one policy. If you pursue this option alone – make sure it adequately protects you regarding all the most unique aspects of your company’s goods and services.

When discussing your insurance needs with your lawyer and insurance agent

Always talk about every reasonable type of harm that your business might suffer. Also, make sure you’ve chosen the best type of partnership or corporate structure to further protect your personal and business assets. Once you fully understand all the risks your company might face, find a highly respected business insurance broker. Always ask trusted business peers for their recommendations for this type of agent.

Finally, speak with your Houston business law attorney about all the specific types of insurance required by the state of Texas for a company like yours. And be sure to address all the federal government’s insurance requirements. Keep in touch with your insurance agent and lawyer throughout each year so they can each readily update you about new legal or policy requirements that may affect your current coverage during the upcoming year.

Please feel free to contact a Murray Lobb lawyer so we can talk with you about the legal aspects of obtaining adequate insurance coverage for all your business needs.