Fee-saving 'DIY's' for Start-ups

Less obviously, hiring an accountant always makes sense. Even though funds may be short, an accountant familiar with small business can put financial systems in place from the beginning. In our litigious society, proper recordkeeping helps avoid “veil-piercing” liability problems.

Before calling a lawyer, however, the organizers can take several steps themselves to make the first meeting with counsel more productive, and avoid fees.

For example, every business needs a name. Often that will be part of the initial marketing plan.

But no one wants to change the firm name after filing legal documents, or investing in advertising and stationery. Instead, the name should be cleared for availability. Make sure that no one else is already using it in a way that would confuse potential customers.

While lawyers can check names, for a cost, entrepreneurs can do a preliminary screening themselves ' and invest professional fees only after obvious legal or practical conflicts have been eliminated.

To start, check whether the name has been taken in the state where the business will be organized. If someone else has already registered it, no one else can. Most state corporate registries can be checked online (see www.nass.org/sos/sosflags.html, and all can be checked by phone.

But the investigation cannot stop there. Just because a name is not registered in a particular state does not mean that it can be used anywhere in the country or the world. Similarly, buying a domain name doesn't create any legal right to use it. Instead, others may have rights to the name through a trademark registration, or simply through prior use.

If the proposed name is confusingly similar to any existing trademark, the trademark owner can sue to block use of its mark. The U.S. Patent and Trademark Office's user-friendly search site at www.uspto.gov/main/trademarks.htm makes conflict-checking easy.

Even more basically, broad Internet searches through Google or other search engines may reveal others using the name. So will checks through several of the online phone directories such as http://www.switchboard.com/, http://directory.superpages.com/people.jsp, http://www.smartpages.com/ /whitepages or www.infobel.com/eldir.

Today, the name should also be cleared for use as a domain name, since so much business is conducted online. This can easily be done by checking whether it is available for purchase at any of the many domain name registrars.

This low-cost, do-it-yourself research avoids unnecessary legal fees, if a large firm or another business is already using a similar name. It makes no sense to pay a lawyer to research or work on a name that can't be used, or to buy into a legal fight. This process also focuses questions to make the most of the initial attorney meeting.

When searching, however, just finding a hit for a particular name doesn't always mean that it can't be used. The similarities may not create a legal problem if potential customers are not likely to be confused. (Tougher rules limit use of “famous” names.)

If the founders really want the name despite potential problems, perhaps the firm can still be formed under a different name than the trademark under which it will market itself to the public.

However, an experienced lawyer should sort out the troublesome initial search results. Proceeding in the face of potential conflicts could cost more, and invites future legal and business problems if customers later confuse the two firms. In addition, be certain that any existing uses of the name do not carry negative associations that will detract from the business.

If more than one owner will be involved, pre-planning for control and operation of the new business can also cut the cost of legal advice. Even if there is a sole owner, the same questions may arise with lenders or potential investors.

For example, most businesspeople generally know who will own what percentages of the new venture. But many do not think about how those interests will be held. The “owner of record” could be the founder, individually, jointly with a spouse or through a trust for children, or through an LLC or other limited liability entity for personal protection.

Counsel will certainly advise on this issue. But it is helpful to discuss ownership in advance, with an accountant or financial advisor, who knows what will be most advantageous for the owner's tax and financial plan.

Similarly, many have basic ideas for the officers and directors of the firm. But what if disagreements occur?

Generally, the President's decision – alone – will control. But should some decisions be unanimous, or require a majority or supermajority? Are there questions on which some founders will have “veto” power? What buyout rights will exist?

No lawyer can answer these questions for a client – but a good lawyer will ask them before setting up the company.

Of course, there are many other choices and legal issues that face any new business, that usually require guidance from experienced counsel. But if the business founders come to the first meeting prepared to answer basic structural questions, “legal advice” need not be shorthand for both delay and expense.

The predicted economic turnaround will certainly bring new business start-ups with it. This time around, however, an entrepreneur's first step shouldn't be buying a sock puppet or a Super Bowl commercial.

So after conceiving a new business, what should the founders do next? Some business necessities seem obvious.

For example, they should write and rewrite a business plan. A good idea is worthless if its cash flow won't last 6 months.

Less obviously, hiring an accountant always makes sense. Even though funds may be short, an accountant familiar with small business can put financial systems in place from the beginning. In our litigious society, proper recordkeeping helps avoid “veil-piercing” liability problems.

Before calling a lawyer, however, the organizers can take several steps themselves to make the first meeting with counsel more productive, and avoid fees.

For example, every business needs a name. Often that will be part of the initial marketing plan.

But no one wants to change the firm name after filing legal documents, or investing in advertising and stationery. Instead, the name should be cleared for availability. Make sure that no one else is already using it in a way that would confuse potential customers.

While lawyers can check names, for a cost, entrepreneurs can do a preliminary screening themselves ' and invest professional fees only after obvious legal or practical conflicts have been eliminated.

To start, check whether the name has been taken in the state where the business will be organized. If someone else has already registered it, no one else can. Most state corporate registries can be checked online (see www.nass.org/sos/sosflags.html, and all can be checked by phone.

But the investigation cannot stop there. Just because a name is not registered in a particular state does not mean that it can be used anywhere in the country or the world. Similarly, buying a domain name doesn't create any legal right to use it. Instead, others may have rights to the name through a trademark registration, or simply through prior use.

If the proposed name is confusingly similar to any existing trademark, the trademark owner can sue to block use of its mark. The U.S. Patent and Trademark Office's user-friendly search site at www.uspto.gov/main/trademarks.htm makes conflict-checking easy.

Even more basically, broad Internet searches through Google or other search engines may reveal others using the name. So will checks through several of the online phone directories such as http://www.switchboard.com/, http://directory.superpages.com/people.jsp, http://www.smartpages.com/ /whitepages or www.infobel.com/eldir.

Today, the name should also be cleared for use as a domain name, since so much business is conducted online. This can easily be done by checking whether it is available for purchase at any of the many domain name registrars.

This low-cost, do-it-yourself research avoids unnecessary legal fees, if a large firm or another business is already using a similar name. It makes no sense to pay a lawyer to research or work on a name that can't be used, or to buy into a legal fight. This process also focuses questions to make the most of the initial attorney meeting.

When searching, however, just finding a hit for a particular name doesn't always mean that it can't be used. The similarities may not create a legal problem if potential customers are not likely to be confused. (Tougher rules limit use of “famous” names.)

If the founders really want the name despite potential problems, perhaps the firm can still be formed under a different name than the trademark under which it will market itself to the public.

However, an experienced lawyer should sort out the troublesome initial search results. Proceeding in the face of potential conflicts could cost more, and invites future legal and business problems if customers later confuse the two firms. In addition, be certain that any existing uses of the name do not carry negative associations that will detract from the business.

If more than one owner will be involved, pre-planning for control and operation of the new business can also cut the cost of legal advice. Even if there is a sole owner, the same questions may arise with lenders or potential investors.

For example, most businesspeople generally know who will own what percentages of the new venture. But many do not think about how those interests will be held. The “owner of record” could be the founder, individually, jointly with a spouse or through a trust for children, or through an LLC or other limited liability entity for personal protection.

Counsel will certainly advise on this issue. But it is helpful to discuss ownership in advance, with an accountant or financial advisor, who knows what will be most advantageous for the owner's tax and financial plan.

Similarly, many have basic ideas for the officers and directors of the firm. But what if disagreements occur?

Generally, the President's decision – alone – will control. But should some decisions be unanimous, or require a majority or supermajority? Are there questions on which some founders will have “veto” power? What buyout rights will exist?

No lawyer can answer these questions for a client – but a good lawyer will ask them before setting up the company.

Of course, there are many other choices and legal issues that face any new business, that usually require guidance from experienced counsel. But if the business founders come to the first meeting prepared to answer basic structural questions, “legal advice” need not be shorthand for both delay and expense.