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• How to Draft an Effective Business Plan Considering the Legal Implications

The road to the creation of a new business is a long one that is often filled with unexpected challenges and accomplishments. While the unpredictable nature of starting a business can be appealing to some, for many there is value in developing a plan to help guide new owners through the first months and years of operation. For this reason, one of the most important steps that entrepreneurs can take when starting out is to carefully and thoughtfully develop a comprehensive business plan.

What Is a Business Plan?

A business plan is both a map and a marketing tool for your business. A business plan helps you carefully set forth the purpose, goals, and priorities of your new business, along with guideposts to help ensure that you stay on the right path. For instance, a business plan may require you to consider what the primary purpose of your business is, or the good or service you intend to provide, who your potential customers are, and how you intend to reach them in an effective and efficient manner. A business plan also allows you to make an honest evaluation of the current status of your business and what you will need to do to get to where you would like to be. This includes taking the time to compile your business balance sheet, analyze existing income and expenses, and determine anticipated financial needs.

Creating a detailed business plan can help business owners acquire outside funding .

In addition, a business plan serves as a marketing tool for new business owners who are attempting to gain financial backing, operational support, or mentoring for their new business. The financial aspects of a business plan lets potential funders or lenders analyze your current income streams and the likelihood of repayment, while the detailed explanation of your business objectives and operational plans helps to convince interested parties that you have taken the time to carefully plan your business endeavors and are invested in the success of your company.

How to Write a Business Plan

There is no one specific way to write a business plan. However, there are key components that most business plans should include, and these are good starting points when working on your own plan. It may also be worth reaching out to an experienced corporate attorney to help you review and revise your business plan before presenting it to others in the business community.

Business plans typically start with a summary of the business and its objectives, and then they describe the operations of the business, the good or service it will be providing, and potential income streams in more detail. Business plans should also include a detailed description of the proposed management structure of the business, including officers or directors and possibly the envisioned composition of the board. Additionally, business plans typically include extensive financial documentation, such as balance sheets, income projections or growth model projections, any pending loan applications, tax returns of the entity, and copies of any relevant legal agreements. If the business has already been in operation for some time, the business plan may also include financial records for the months of operation.

• Summarize the business and its objectives
• Outline how the business is organized and managed
• Describe what the business sells
• Identify potential income streams
• Include financial information, such as balance sheets and projections

Using Your Business Plan

Once you have completed a business plan that you are happy with, you will find that you will often continue to refer to your plan even months or years after it was initially completed. In the initial stages, you can use your business plan to attract investors, partners, board members, or other advisors who are interested in the model you have proposed and would like to contribute to its success. As your business develops, you can continue to refer to the plan to guide you in business decisions, as well as to track timelines or certain goals that you hoped to meet. Even after your business is well-developed, returning to your business plan can help guide your yearly planning for your company, allowing you to modify your goals as they are achieved.

Last reviewed October 2023

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Understanding the Legal Aspects of Business Planning

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Introduction

When it comes to business planning, it is important to understand the legal aspects of the process. Legal aspects are those aspects that are related to the law—they involve state and federal regulations, as well as company policies and procedures. This article will provide an overview of business planning and the legal aspects involved.

Definition of Legal Aspects

Legal aspects are an important part of a company's overall business plan. They are the rules and regulations that govern how a business operates within the framework of the law. They involve a wide range of topics, including intellectual property, taxes, contracts, regulatory compliance, and more. Understanding and adhering to legal aspects is essential for businesses seeking to avoid legal disputes and remain in compliance with applicable laws.

Overview of Business Planning

Business planning is the process of developing long-term strategies and objectives for a business. It involves analyzing a business' financials, market conditions, competitors, and overall industry trends in order to create a roadmap that will guide the business toward its goals. The process also involves understanding and accounting for legal aspects, such as corporate laws, contract law, antitrust laws, and employment laws.

Sources of Law

For an effective business planning, it is important to be aware of the various sources of laws that can affect the business. Understanding the legal aspects of business planning is essential for the success and longevity of the business.

At the most basic level, municipal laws are enacted by local jurisdictions, such as cities and counties. These laws provide regulation and guidance that can affect aspects of the business, such as zoning, licensing, building codes, and taxes. By understanding the municipal laws in the area, business owners can plan accordingly and ensure their businesses are compliant.

In addition to municipal laws, provincial laws govern business activities within Canada. These laws provide guidelines and regulations on a range of topics, such as employment standards, consumer protection, and environmental protection. These laws are often more comprehensive than municipal laws, and business owners should familiarize themselves with the provincial laws in their province in order to ensure compliance.

At the highest level, federal laws govern activities and transactions within all of Canada. These laws provide a framework for businesses nationwide and provide guidance on topics such as trade, securities, and intellectual property. Business owners must pay close attention to federal laws in order to ensure compliance with national regulations.

Legal Considerations

When planning a business, it is essential to also consider the legal aspects that accompany the process. Creating a business requires one to understand the various legal considerations, and evaluate how the business will be structured, taxed, and how contracts and other agreements must be handled.

Business Structure

The first major legal consideration for a business is to choose a business structure. A business structure outlines the way a business is legally organized, and the main types of business structures are limited liability company (LLC), sole proprietorship, partnership, corporation, and cooperative. Each structure has different requirements in regards to licenses, taxes, and liability and should be chosen based on the type of business, the number of owners, and the plans for growth.

It is important to understand the various tax laws that apply to businesses. The types of taxes that businesses must abide by generally include corporate taxes, income taxes, sales taxes, and payroll taxes, and each of these taxes must be properly managed. Additionally, businesses must ensure that all applicable tax regulations are followed in order to avoid penalties.

Contracts and Agreements

Contracts and other agreements are an important legal aspect of running a business. Before entering into any kind of agreement, businesses must assess the potential risks and liabilities as well as the potential benefits and be aware of any applicable laws. Contracts should be well-drafted to ensure that all parties are protected, and should include all relevant terms, obligations and conditions. It is also important to properly document all contracts and agreements, as this will help ensure that all parties are on the same page and that all obligations are fulfilled.

Importance of Labour Laws

Labour laws protect the employee from exploitation from employers, and ensure their health, safety and security at their workplace. It also ensures that employees have a fair and reasonable working environment. Employers need to be fully aware of these laws and regulations, so that they can regulate their business around them.

Employment Standards

The labor laws specify several key employment standards that employers must comply with. This includes the minimum wage (fixed by the country), payment of overtime wages, hours of work and working conditions that must be met.

Health & Safety

This is an important factor that employers need to be aware of. Employers must ensure that the workplace is safe, with appropriate safety measures, such as wearing protective gears, proper ventilation, and hazardous substances and materials are stored safely. This helps minimize the risks of employee injuries and illnesses.

Human Rights

Labor laws also protect the rights of employees in the workplace. This includes prohibiting discrimination in the workplace, ensuring equal pay for equal work, and freedom of association. This helps to ensure that there is no unfair advantage given to any group in the workplace.

5. Intellectual Property

Intellectual Property (IP) is a legally protected property that is the creation of the mind and is normally used to refer to a business’s intangible assets, such as trademarks, copyrights, and patents. In order to create, maintain and protect a successful business plan, it is important to understand and recognize the various types of intellectual property.

A. Trademark

A trademark is a distinctive sign that is used to identify the products and services of a specific business. It is typically associated with the name, symbol or logo that a business uses to designate its goods and services. The purpose of a trademark is to distinguish a business’s goods and services from others, and it also serves to protect a business’s reputation and goodwill. In order to register a trademark, the business must apply to the USPTO (U.S. Patent and Trademark Office).

B. Copyrights

Copyright is a form of legal protection that is designed to protect the creative expressions of authors, creators, and companies. It is the exclusive right to reproduce, publish, or perform a work. In order to be eligible for copyright protection, the work must meet certain requirements, such as that it is of an original expression created by an author, and it must be fixed in a tangible form which allows it to be reproduced. Copyrights are typically registered with the U.S. Copyright Office.

A patent is a form of intellectual property that grants the owner the exclusive right to use, manufacture, and sell an invention for a specific period of time. A patent must meet certain criteria in order to be eligible for protection, such as that it must be new and inventive, and it must also have a new and useful purpose. Patents are typically filed with the USPTO and are typically in force for twenty years.

Financial Regulations

Financial regulations are essential for any business regardless of its size or industry. It is important to understand these regulations so that business owners can ensure that their operations remain in compliance and avoid costly penalties. Financial regulations involve reporting requirements for the issuing of securities, filing of financial statements and adherence to accounting standards.

Financial Statements

Financial statements are documents that report the financial status of a business. These statements typically include an income statement, balance sheet and statement of cash flows and must be filed with the relevant regulatory bodies each year. Businesses must accurately and honestly report their financial position in order to comply with regulations and demonstrate their financial wellbeing to investors and creditors.

Businesses must also adhere to certain accounting standards. The Generally Accepted Accounting Principles (GAAP) offer a framework of guidelines that must be followed so as to ensure the accuracy and transparency of financial statements. Failing to comply with these regulations can result in penalties and fines, so it is important for business owners to understand and adhere to GAAP rules.

Securities regulations involve certain requirements for businesses looking to issue stocks, bonds or other securities. These regulations ensure the protection of investors by requiring full disclosure of all relevant information concerning the issues of securities. Failing to adhere to these regulations can result in fines or criminal charges so it is important to ensure that all securities regulations are strictly followed.

Understanding the legal aspects of business planning is vital for the smooth operation of any business. Legal considerations must be taken into account for the successful setup, operation, and expansion of the business. The most important legal considerations include deciding on the business structure, obtaining permits and licenses, complying with tax laws, registering trademarks, protecting intellectual property, and avoiding legal disputes.

Summary of Legal Considerations

In this blog post, we discussed the essential legal considerations that must be taken into account when creating a business plan. These considerations include:

• Choosing the right business structure
• Obtaining necessary permits and licenses
• Complying with tax laws
• Registering trademarks
• Protecting intellectual property
• Avoiding legal disputes

By understanding and following the legalities of business planning, entrepreneurs can ensure that their businesses operate smoothly and within the law.

Invitation to Seek Professional Advice

Navigating through all the legal considerations involved in business planning can be a daunting task for entrepreneurs. For this reason, it is highly recommended to seek professional advice from a qualified and experienced legal professional when creating a business plan. Professional advice can save entrepreneurs time and money in the long run.

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How to Choose the Best Legal Structure for Your Business

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Choosing the right legal structure is a necessary part of running a business. Whether you're just starting out or your business is growing, it's crucial to understand the options.

Table of Contents

Your business’s legal structure has many ramifications. It can determine how much liability your company faces during lawsuits. It can put up a barrier between your personal and business taxes – or ensure this barrier doesn’t exist. It can also determine how often your board of directors must file paperwork – or if you even need a board. [Related article: What to Do if Your Business Gets Sued ]

We’ll explore business legal structures and how to choose the right structure for your organization. 

What is a business legal structure?

A business legal structure, also known as a business entity, is a government classification that regulates certain aspects of your business. On a federal level, your business legal structure determines your tax burden. On a state level, it can have liability ramifications.

Why is a business legal structure important?

Choosing the right business structure from the start is among the most crucial decisions you can make. Here are some factors to consider:

• Taxes: Sole proprietors, partnership owners and S corporation owners categorize their business income as personal income. C corporation income is business income separate from an owner’s personal income. Given the different tax rates for business and personal incomes, your structure choice can significantly impact your tax burden.
• Liability: Limited liability company (LLC) structures can protect your personal assets in the event of a lawsuit. That said, the federal government does not recognize LLC structures; they exist only on a state level. C corporations are a federal business structure that includes the liability protection of LLCs.
• Paperwork: Each business legal structure has unique tax forms. Additionally, if you structure your company as a corporation, you’ll need to submit articles of incorporation and regularly file certain government reports. If you start a business partnership and do business under a fictitious name, you’ll need to file special paperwork for that as well.
• Hierarchy: Corporations must have a board of directors. In certain states, this board must meet a certain number of times per year. Corporate hierarchies also prevent business closure if an owner transfers shares or exits the company, or when a founder dies . Other structures lack this closure protection.
• Registration: A business legal structure is also a prerequisite for registering your business in your state. You can’t apply for an employer identification number (EIN) or all your necessary licenses and permits without a business structure.
• Fundraising: Your structure can also block you from raising funds in certain ways. For example, sole proprietorships generally can’t offer stocks. That right is primarily reserved for corporations.
• Potential consequences for choosing the wrong structure: Your initial choice of business structure is crucial, although you can change your business structure in the future. However, changing your business structure can be a disorganized, confusing process that can lead to tax consequences and the unintended dissolution of your business. 

Types of business structures

The most common business entity types are sole proprietorships, partnerships, limited liability companies, corporations and cooperatives. Here’s more about each type of legal structure.

Sole proprietorship

A sole proprietorship is the simplest business entity. When you set up a sole proprietorship , one person is responsible for all a company’s profits and debts.

“If you want to be your own boss and run a business from home without a physical storefront, a sole proprietorship allows you to be in complete control,” said Deborah Sweeney, vice president and general manager of business acquisitions at Deluxe Corp. “This entity does not offer the separation or protection of personal and professional assets, which could prove to become an issue later on as your business grows and more aspects hold you liable.”

Proprietorship costs vary by market. Generally, early expenses will include state and federal fees, taxes, business equipment leases , office space, banking fees, and any professional services your business contracts. Some examples of these businesses are freelance writers, tutors, bookkeepers , cleaning service providers and babysitters.

A sole proprietorship business structure has several advantages.

• Easy setup: A sole proprietorship is the simplest legal structure to set up. If you – and only you – own your business, this might be the best structure. There is very little paperwork since you have no partners or executive boards.
• Low cost: Costs vary by state, but generally, license fees and business taxes are the only fees associated with a proprietorship.
• Tax deduction: Since you and your business are a single entity, you may be eligible for specific business sole proprietor tax deductions , such as a health insurance deduction.
• Easy exit: Forming a proprietorship is easy, and so is ending one. As a single owner, you can dissolve your business at any time with no formal paperwork required. For example, if you start a day care center and wish to fold the business, refrain from operating the day care and advertising your services.

The sole proprietorship is also one of the most common small business legal structures. Many famous companies started as sole proprietorships and eventually grew into multimillion-dollar businesses. These are a few examples:

• Marriott Hotels

Partnership 

A partnership is owned by two or more individuals. There are two types: a general partnership, where all is shared equally, and a limited partnership, where only one partner has control of operations and the other person (or persons) contributes to and receives part of the profits. Partnerships can operate as sole proprietorships, where there’s no separation between the partners and the business, or limited liability partnerships (LLPs), depending on the entity’s funding and liability structure.

“This entity is ideal for anyone who wants to go into business with a family member, friend or business partner – like running a restaurant or agency together,” Sweeney said. “A partnership allows the partners to share profits and losses and make decisions together within the business structure. Remember that you will be held liable for the decisions made as well as those actions made by your business partner.”

General partnership costs vary, but this structure is more expensive than a sole proprietorship because an attorney should review your partnership agreement. The attorney’s experience and location can affect the cost. 

A business partnership agreement must be a win-win for both sides to succeed. Google is an excellent example of this. In 1995, co-founders Larry Page and Sergey Brin created a small search engine and turned it into the leading global search engine. The co-founders met at Stanford University while pursuing their doctorates and later left to develop a beta version of their search engine. Soon after, they raised $1 million in funding from investors, and Google began receiving thousands of visitors a day. Having a combined ownership of 11.4% of Google provides them with a total net worth of nearly $226.4 billion.

Business partnerships have many advantages. 

• Easy formation: As with a sole proprietorship, there is little paperwork to file for a business partnership. If your state requires you to operate under a fictitious name ( “doing business as,” or DBA ), you’ll need to file a Certificate of Conducting Business as Partners and draft an Articles of Partnership agreement, both of which have additional fees. You’ll usually need a business license as well.
• Growth potential: You’re more likely to obtain a business loan with more than one owner. Bankers can consider two credit histories rather than one, which can be helpful if you have a less-than-stellar credit score.
• Special taxation: General partnerships must file federal tax Form 1065 and state returns, but they do not usually pay income tax. Both partners report their shared income or loss on their individual income tax returns. For example, if you opened a bakery with a friend and structured the business as a general partnership, you and your friend are co-owners. Each owner brings a certain level of experience and working capital to the business, affecting each partner’s business share and contribution. If you brought the most seed capital for the business, you and your partner may agree that you’ll retain a higher share percentage, making you the majority owner.

Partnerships are one of the most common business structures. These are some examples of successful partnerships:

• Warner Bros.
• Hewlett-Packard
• Ben & Jerry’s

Limited liability company 

A limited liability company (LLC) is a hybrid structure that allows owners, partners or shareholders to limit their personal liabilities while enjoying a partnership’s tax and flexibility benefits. Under an LLC, members are shielded from personal liability for the business’s debts if it can’t be proven that they acted in a negligent or wrongful manner that results in injury to another in carrying out the activities of the business.

“Limited liability companies were created to provide business owners with the liability protection that corporations enjoy while allowing earnings and losses to pass through to the owners as income on their personal tax returns,” said Brian Cairns, CEO of ProStrategix Consulting. “LLCs can have one or more members, and profits and losses do not have to be divided equally among members.”

According to Wolters Kluwer , the cost of forming an LLC comprises the state filing fee and can vary depending on your state. For example, if you file an LLC in New York, you must pay a $200 filing fee, a $9 biennial fee, and file a biennial statement with the New York Department of State .

Although small businesses can be LLCs, some large businesses choose this legal structure. The structure is typical among accounting, tax, and law firms, but other types of companies also file as LLCs. One example of an LLC is Anheuser-Busch, one of the leaders in the U.S. beer industry. Headquartered in St. Louis, Anheuser-Busch is a wholly owned subsidiary of Anheuser-Busch InBev, a multinational brewing company based in Leuven, Belgium.

Here some other well-known examples of LLCs:

• Hertz Rent-a-Car

Corporation 

The law regards a corporation as separate from its owners, with legal rights independent of its owners. It can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks. Corporation filing fees vary by state and fee category. 

There are several types of corporations, including C corporations , S corporations, B corporations, closed corporations, and nonprofit corporations.

• C corporations: C corporations, owned by shareholders, are taxed as separate entities. JPMorgan Chase & Co. is a multinational investment bank and financial services holding company listed as a C corporation. Since C corporations allow an unlimited number of investors, many larger companies – including Apple, Bank of America and Amazon – file for this tax status.
• B corporations: B corporations, otherwise known as benefit corporations, are for-profit entities committed to corporate social responsibility and structured to positively impact society. For example, skincare and cosmetics company The Body Shop has proven its long-term commitment to supporting environmental and social movements, resulting in an awarded B corporation status. The Body Shop uses its presence to advocate for permanent change on issues like human trafficking, domestic violence, climate change, deforestation and animal testing in the cosmetic industry.
• Closed corporations: Closed corporations, typically run by a few shareholders, are not publicly traded and benefit from limited liability protection. Closed corporations, sometimes referred to as privately held companies, have more flexibility than publicly traded companies. For example, Hobby Lobby is a closed corporation – a privately held, family-owned business. Stocks associated with Hobby Lobby are not publicly traded; instead, the stocks have been allocated to family members.
• Open corporations: Open corporations are available for trade on a public market. Many well-known companies, including Microsoft and Ford Motor Co., are open corporations. Each corporation has taken ownership of the company and allows anyone to invest.
• Nonprofit corporations: Nonprofit corporations exist to help others in some way and are rewarded by tax exemption. Some examples of nonprofits are the Salvation Army, American Heart Association and American Red Cross. These organizations all focus on something other than turning a profit.

Corporations enjoy several advantages. 

• Limited liability: Stockholders are not personally liable for claims against your corporation; they are liable only for their personal investments.
• Continuity: Corporations are not affected by death or the transferring of shares by their owners. Your business continues to operate indefinitely, which investors, creditors and consumers prefer.
• Capital: It’s much easier to raise large amounts of capital from multiple investors when your business is incorporated.

This structure is ideal for businesses that are further along in their growth, rather than a startup based in a living room. For example, if you’ve started a shoe company and have already named your business, appointed directors and raised capital through shareholders, the next step is to become incorporated. You’re essentially conducting business at a riskier, yet more lucrative, rate. Additionally, your business could file as an S corporation for the tax benefits. Once your business grows to a certain level, it’s likely in your best interest to incorporate it.

These are some popular examples of corporations:

• General Motors
• Exxon Mobil Corp.
• Domino’s Pizza
• JPMorgan Chase

Learn more about how to become a corporation .

Cooperative 

A cooperative (co-op) is owned by the same people it serves. Its offerings benefit the company’s members, also called user-owners, who vote on the organization’s mission and direction and share profits.

Cooperatives offer a couple main advantages.

• Increased funding: Cooperatives may be eligible for federal grants to help them get started.
• Discounts and better service: Cooperatives can leverage their business size, thus obtaining discounts on products and services for their members.

Forming a cooperative is complex and requires you to choose a business name that indicates whether the co-op is a corporation (e.g., Inc. or Ltd.). The filing fee associated with a co-op agreement varies by state. 

An example of a co-op is CHS Inc., a Fortune 100 business owned by U.S. agricultural cooperatives. As the nation’s leading agribusiness cooperative, CHS reported a net income of $422.4 million for fiscal year 2020. These are some other notable examples of co-ops:

• Land O’Lakes
• Navy Federal Credit Union
• Ace Hardware

Factors to consider before choosing a business structure

For new businesses that could fall into two or more of these categories, it’s not always easy to decide which structure to choose. Consider your startup’s financial needs, risk and ability to grow. It can be challenging to switch your legal structure after registering your business, so give it careful analysis in the early stages of forming your business. 

Here are some crucial factors to consider as you choose your business’s legal structure. You should also consult a CPA for advice.

Flexibility 

Where is your company headed, and which type of legal structure allows for the growth you envision? Turn to your business plan to review your goals and see which structure best aligns with those objectives. Your entity should support the possibility for growth and change, not hold it back from its potential. [Learn how to write a business plan with this template .]

When it comes to startup and operational complexity, nothing is more straightforward than a sole proprietorship. Register your name, start doing business, report the profits and pay taxes on it as personal income. However, it can be difficult to procure outside funding. Partnerships, on the other hand, require a signed agreement to define the roles and percentages of profits. Corporations and LLCs have various reporting requirements with state governments and the federal government.

A corporation carries the least amount of personal liability since the law holds that it is its own entity. This means creditors and customers can sue the corporation, but they can’t gain access to any personal assets of the officers or shareholders. An LLC offers the same protection but with the tax benefits of a sole proprietorship. Partnerships share the liability between the partners as defined by their partnership agreement.

An owner of an LLC pays taxes just as a sole proprietor does: All profit is considered personal income and taxed accordingly at the end of the year.

“As a small business owner, you want to avoid double taxation in the early stages,” said Jennifer Friedman, principal at Rivetr. “The LLC structure prevents that and makes sure you’re not taxed as a company, but as an individual.”

Individuals in a partnership also claim their share of the profits as personal income. Your accountant may suggest quarterly or biannual advance payments to minimize the effect on your return. 

A corporation files its own tax returns each year, paying taxes on profits after expenses, including payroll. If you pay yourself from the corporation, you will pay personal taxes, such as those for Social Security and Medicare, on your personal return. 

If you want sole or primary control of the business and its activities, a sole proprietorship or an LLC might be the best choice. You can negotiate such control in a partnership agreement as well.

A corporation is constructed to have a board of directors that makes the major decisions that guide the company. A single person can control a corporation, especially at its inception, but as it grows, so does the need to operate it as a board-directed entity. Even for a small corporation, the rules intended for larger organizations – such as keeping notes of every major decision that affects the company – still apply.

Capital investment

If you need to obtain outside funding from an investor, venture capitalist or bank, you may be better off establishing a corporation. Corporations have an easier time obtaining outside funding than sole proprietorships.

Corporations can sell shares of stock and secure additional funding for growth, while sole proprietors can obtain funds only through their personal accounts, using their personal credit or taking on partners. An LLC can face similar struggles, although, as its own entity, it’s not always necessary for the owner to use their personal credit or assets.

Licenses, permits and regulations

In addition to legally registering your business entity, you may need specific licenses and permits to operate. Depending on the type of business and its activities, it may need to be licensed at the local, state and federal levels.

“States have different requirements for different business structures,” Friedman said. “Depending on where you set up, there could be different requirements at the municipal level as well. As you choose your structure, understand the state and industry you’re in. It’s not ‘one size fits all,’ and businesses may not be aware of what’s applicable to them.”

The structures discussed here apply only to for-profit businesses. If you’ve done your research and you’re still unsure which business structure is right for you, Friedman advises speaking with a specialist in business law.

Max Freedman and Matt D’Angelo contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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16 Important Legal Requirements for Starting a Small Business

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Starting a new business is a challenging pursuit. Part of what makes it so complicated is all the legal implications that come with starting a business. As a business owner, you want to make sure you have covered all your legal bases to avoid any fines, lawsuits, or—worst case—even jail time.

Fortunately, there are plenty of legal resources available to small businesses both online and through hired legal counsel. Use this list as a jumping off point, covering the legal requirements for starting a small business. Checking these off your to-do list will help you ensure that you don't run afoul of any laws. The sooner you take care of these things, the sooner you can focus on what you do best—selling your product or service.

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16 legal requirements for starting a small business

1. designate the proper business entity..

First things first. Choose the proper business entity or structure for your startup. This is crucial because it affects your personal liability, what you pay in taxes, and your fundraising ability. Possible structures include sole proprietorship, general and limited partnership, C-corporation, S-corporation, and limited liability company. Once you decide which structure is best for your company, you need to officially designate it through your secretary of state.

Most small businesses start out as sole proprietorships or partnerships because these require minimal paperwork and set up time. However, these types of businesses also don't offer sufficient liability protection for business owners. A corporation or LLC is generally a better choice as your business grows, particularly if you're planning to secure a business loan or raise venture capital.

» MORE: LLC vs. corporation

2. Check which licenses, permits, and registrations your business needs.

Depending on your type of business and where it’s located, you might need specific business licenses and permits from your country, state, county, or city. Licenses, permits, and registrations come in many variations. Examples include local business licenses, building permits, health safety-related permits, permits for home-based businesses, fire permits, industry-related permits (like running a legal practice, hospitality, construction, or manufacturing business), liquor licenses, and more.

The possibilities are many, so make sure to do thorough research—perhaps with the help of your counsel—on what you need to be compliant with the law in your area. Your city or county's business licensing agency is also a good place to start.

3. Make sure you are paying proper business taxes.

Every business owner is legally required to pay taxes. This includes income tax, self-employment taxes, and for some businesses, sales tax. It's wise to hire an accountant or tax advisor to make sure you are compliant with all tax laws. Accounting software can also help you figure when to file taxes and what forms you need to fill out.

Most small business owners can't wait until March or April to pay taxes. The IRS has a pay-as-you-go tax schedule for businesses, requiring business owners to pay estimated taxes on a quarterly basis. Make sure you check the IRS requirements for your business type to avoid any fines and back taxes.

4. Do proper bookkeeping.

In most places, you are obligated by law to record all business transactions according to a specific accounting method. See what’s required of you for your industry and location in terms of record-keeping obligations, and set up a proper filing and bookkeeping system for all documents and transactions. This will greatly help you down the line in doing taxes or if you ever run into other legal troubles.

5. Get a founders agreement in writing.

If your business operates with multiple business owners, it’s important to make sure that each person knows and understands their rights and responsibilities in relation to the business. How this comes about depends on your business structure. If you form a corporation, you need a proper shareholder agreement and articles of incorporation. If you form an LLC, you will need articles of organization and an LLC operating agreement. You also need designated legal counsel to make sure the agreements and articles are sound.

6. Set a vesting schedule for all founders and early employees.

This is a practical measure many startups often overlook when they’re just starting out and excited about getting off the ground. But this will protect your business down the line and ensure a certain level of commitment each founder or early employee brings to the table.

Creating a vesting schedule upon incorporation states that stock ownership will vest over time, preventing investors from selling all their stock whenever they please. Note that most investors require this measure before they'll make any initial investments.

7. Get your employer identification number (EIN).

In order to open a corporate bank account and to properly file your business tax returns, many businesses need an employer identification number (EIN). You can easily request one for free from the IRS over the phone or by using an online application on the IRS website. Only sole proprietorships and single-member LLCs with no employees are exempt from this requirement.

You need the social security number of the person completing the form for the company (usually the president or CEO). Include information on your business entity and date of incorporation. Make sure to keep a signed copy of this application in your files.

8. Protect your intellectual property (IP).

Intellectual property is the bread and butter of many businesses. IP includes patents, copyrights, trademarks, and trade secrets as well. Be sure to file any patents as soon as possible—a process that can take more than five years. Protecting your intellectual property will be attractive to investors—but it will also help you sleep easier at night. Having exclusive rights to reproduce and display your work will make your life much, much easier down the line and ensure that no one tries to rip any IP rugs out from under you.

IP can be vastly complicated from a legal standpoint, so it might be wise to consult an experienced IP attorney who can help you through the process and provide you the greatest protection.

9. Classify your workers properly.

Many startups often misclassify their early employees. It’s important to know what kind of worker you’re hiring—essentially, the difference between an independent contractor vs. employee. This is important for tax reasons for both you and the employee and will help clarify what is and isn’t expected from you and the employee. If you misclassify an employee as an independent contractor, you could be on the hook for costly penalties and back wages.

10. Purchase workers' compensation insurance.

In all states but Texas, most businesses with employees are legally required to purchase workers' compensation insurance . Coverage should begin from the very first day your employee starts working. This insurance covers medical and legal costs associated with work-related employee injuries and illnesses. State laws about workers' compensation vary, so make sure you check your state's rules.

11. Make sure you’re in compliance with securities laws.

Founders and investors of LLCs, C-corporations, and partnerships are subject to federal and state securities laws. These laws were made to require companies to provide reliable and accurate information about their businesses to enable a fair market. They also protect from insider trading and trading fraud.

Failure to comply with these laws can result in the startup having to repurchase all of its shares at the issuance price, even if the company has lost all of its money.

12. Follow email regulations.

Email marketing is a huge part of many businesses. When you send emails to your customers or when you are targeting potential customers via email campaigns, you need to find out what the applicable email regulations are. Note that each country has its own set of rules.

Aspects covered by these rules generally include opt-in versus opt-out, B2B or B2C emails, unsubscribe rules, and minimum information to be included in your emails.

13. Make sure your investors are accredited.

The current definition of an accredited investor under the Securities and Exchange Commission rules includes eight categories of investors, but the most general investor accreditation means that the person:

Has at least $1 million in the bank

Has at least $200,000 in annual income

Understands and is willing to take the investment risk

The SEC has guidelines for what constitutes “reasonable efforts” on these accounts. It’s possible to raise funds outside the narrow limitation of accredited investors, but it will open up a Pandora’s box in terms of securities and compliance enforcement. So, if you want to be the most legally sound you can possibly be, go through accredited investors.

14. Establish a privacy policy.

A privacy policy is a legal statement that specifies what a business does with the personal data collected from users or customers, along with how the data is processed and why. Violation of privacy laws can lead to criminal liability—depending on your state, this can mean hefty fines—so it’s important that startups have proper privacy policies in place and carefully adhere to them. The Small Business Administration has a great guide for establishing an appropriate privacy policy for your business.

15. Create a company handbook.

Once you have all the legal headaches sorted out and sounded, make sure everyone in the company is aware and understands your company’s legal liabilities just as well as you do—as a business owner, you could be liable for anything your employees do while representing your organization.

Company or employee handbooks are a great way to instill the values and legal boundaries of your company. It can also help to establish what is and isn’t appropriate behavior internally and externally. Have your legal counsel look this over well or even help you write it, and then get the company together to go over the material.

16. Hire competent legal counsel.

In case this hasn’t been clear throughout, work with lawyers on these complicated legal issues from the start. Startups are often so concerned about expenses that they overlook the importance of sound legal advice that could save them thousands, if not millions, down the line. You really can’t put a price on having the right attorneys on your side.

Ideally, you’ll hire an experienced business attorney on employment law, contract law, securities law, and intellectual property law. You could hire a “general counsel” on your staff at some point, but it’s common for the work to be spread out between different firms and attorneys. The cost is worth avoiding any legal trouble.

The bottom line

Starting a business is hard—don’t let anyone tell you otherwise. But if you are meticulous about getting your startup legal checklist in order, you’ll save yourself from some serious headaches down the line. Some of these items are things you can take care of yourself. But for more complicated tasks, or if you run into questions, it's important to hire a competent attorney to help you.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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7 Legal Considerations to Prioritize When Starting a Business

Nothing can be more exciting than the thought of opening your own business. But you have to go through numerous processes when starting your own company, so much so that your excitement can easily dissipate just thinking about them.

Top lawyers say that learning about and dealing with the legal issues that come with starting your venture first can help you go through these processes correctly and efficiently. You will also reduce the likelihood of making costly and time-consuming mistakes that can delay or negatively affect your plans of opening your business.

The Legal Aspects of Opening a Business

When starting your own business , there are a number of legal requirements that you have to satisfy or adhere to. The most important ones are:

1 - The legal structure of your business

One of the many important decisions you have to make when starting a business is to decide on the legal status or structure of your company. Your chosen legal structure will affect how you run your business. It will also have implications on how you pay your taxes and keep your accounts.

The most widely used business legal structures are: ● Limited partnership ● Sole proprietorship ● Limited Liability Company (LLC) ● Corporation ● S-corporation To decide on which status is best for your new business, consider all liability issues that may be associated with your company. Think about which type of tax structure will be best for your business as well.

2 - Trademark

Before selecting your business’s official name, perform a meticulous search online first. Find out if there is another business operating under the name you’ve come up with for your new venture. Do this to avoid infringing upon another company’s trademark and getting caught up in a trademark opposition action .

Once you’ve selected your official company name, consider registering your trading name and logo (if you already have one) as a trademark. This will prevent others from registering their company under the same name.

3 - Licenses

You will need several types of licenses or permits before you open your business. The number of licenses your business will require will depend on the kind of establishment you want it to be. At the very least, you will need a business license, trading license, and sales tax permit.

If you plan to open a restaurant, pub, or catering company, you will have to register with the local governing body for food standards and health and safety oversight. If you plan to provide entertainment in your establishment, you will also need to get the relevant permits for music and entertainment.

It is best to do some additional research and contact relevant local government agencies to learn more about the specific licenses you will need to legally run your business.

4 - Zoning laws

If you are still looking for a good location for your shop, establishment or office, you have to make sure that the area you are eyeing is properly zoned for the type of business you plan to operate. Again, do some research or ask local government bodies to be certain that you can open your business in that area.

Do not make the costly mistake of assuming that your zoning is appropriate just because your business is similar to the ones already located there. There will be instances wherein zoning may have changed while the other businesses were already operating, and these companies may have been given exemptions that won't be provided to new establishments such as yours.

5 - Relevant health and safety laws

As a business owner, you will have to assume several important health and safety responsibilities. These include ensuring that your employees work in a safe, healthy environment.

You also have the duty to look after the well-being of anyone including clients and visitors inside, outside, and near your business premises.

It is highly recommended that you carry out a risk assessment to help identify the risks posed to individuals by your business activities. You then have to mitigate these risks or hazards as much as possible. This may include changing some standard operating procedures and removing some fixtures to ensure that employees and members of the public are safe.

6 - Insurance

Most business zones require all businesses that employ a number of workers to get employer's liability insurance. But aside from being a legal requirement, when you have sufficient coverage, you will avoid incurring fines every day that you are uninsured. You also avoid leaving yourself vulnerable to compensation claims from employees and visitors who may get injured or sick while they are in your premises.

Aside from an employer’s liability insurance, you may want to consider investing in public liability or professional indemnity as well. These types of coverage will help protect your business from compensation claims if something goes awry.

7 - Confidentiality and Non-Disclosure Agreements

Lastly, if you will be working with a bank or other partners for business financing or entering into contracts with suppliers, make sure you have the right confidentiality and non-disclosure agreements.

These parties will have access to business information that you may want to keep private and, as such, you should consider preparing these contracts. Make sure your partners and suppliers sign them as well.

Knowing which laws apply to your new business is something that is also important if you want to open a company overseas. If you want to expand globally, make it a priority to consult a trusted corporate law firm to guide you every legal step of the way.

Our guest author Al Tamimi is senior partner at law firm Al Tamimi & Company.

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How to write a business plan

This advice from the pros will make the process of writing a business plan easier and less stressful.

Ready to start your business? Plans start at $0 + filing fees.

by   Sandra Beckwith

Sandra Beckwith has been writing for traditional and online publications since she sold her first magazine article wh...

Read more...

Updated on: January 6, 2023 · 4 min read

1. Begin with the easy sections

2. create a target audience persona, 3. get smart about your industry and market, 4. know, understand, and analyze your competition, 5. dig into the numbers.

Writing a business plan can seem intimidating, especially when you don't know how to get started. It helps to know that it doesn't need to be long—we aren't talking about high school term papers here, particularly if it's just for internal purposes. And the writing process is also a lot easier when you know where to find some of the information you need.

Here's advice that will help you write a thorough, accurate document.

The  typical business plan  includes these elements:

• Executive summary
• Company description with the mission statement
• Products and services
• Target audience
• Market analysis
• Competitive analysis
• Operations and management
• Sales and marketing strategy
• Financial plan

You probably know some of this off the top of your head, so warm up by starting with those pieces.

Also known as an "avatar," the process of creating a target audience persona helps give you clarity about who will buy your product or service. It starts with research. This is important because target audience specifics will influence and guide your sales and marketing strategy.

Dave Lavinsky, president of  Growthink , recommends getting demographic information about potential customers by generating reports for competitor website URLs at  SimilarWeb  and  Alexa .

"If you operate a brick-and-mortar business serving local customers, go to the  U.S. Census Quick Facts page  and enter your ZIP code to find the demographic profiles of the areas you are serving," he adds.

Audience Insights data from your Facebook business page will provide valuable intelligence, as will customer insights tools  SparkToro  and  Audiense .

Use the demographic information you find about potential customers at these sites, along with other research such as surveys, one-on-one conversations, and focus groups, to create that single person—your customer persona—that best represents your target customer.

"What's the market value, how does it operate, what are the needs, and who are your direct and indirect competitors? You need to understand the ins and outs of how the market works, and how the profit is made," says Zohar Gilad, CEO and co-founder of  InstantSearch+ .

Start with the local library reference desk, advises Linda Murray Bullard, chief business strategist at  LSMB Business Solutions . "The local Small Business Administration office or small business development center has a wealth of information that can help, too, and some will even do the market analysis for you," she says.

Lavinsky also recommends looking for market information on industry association websites and in research reports available online. In addition, check trade journals as well as the Bureau of Labor Statistics and the Census Bureau.

Your research into competitive products or services and pricing, combined with knowledge of how customers perceive them, will help shape your product and positioning.

Reuben Yonatan, founder and CEO of  GetVoIP , recommends categorizing competitors as primary and secondary. Learn as much as you can about your primary competitors because they often represent your end goal, but don't overlook the others. "With secondary competitors, extract as much insight as possible. For example, try to determine why they are not at the top of the food chain. Could it be their pricing?" he says.

Talk to their vendors and customers, and study their website, marketing materials, and press releases. How are their offerings different from yours? How are they the same? This information will help you explain your differentiation in the business plan.

The primary purpose of the financial plan, says Phil Santoro, co-founder of startup studio  Wilbur Labs , is to document how much money you need to start the business, and how or when the business will generate revenue and profit.

When creating the financial plan, he determines where the company wants to be in three to five years, then builds a roadmap to get there. "Working backwards like this allows you to look at the different workstreams required for each phase of the business," he says. "Most importantly, working backwards lets you create projections based on achievable assumptions. A plan is only as good as the assumptions that go into it."

This is not a situation where you  want to guess . In addition to working with an accountant, base your financial projections on verified data from Dun & Bradstreet Business Ratios reports, says marketing consultant Marsha Kelly of  Best4Businesses.com . "This verifiable information is dependable to make business projections and to assure banker investors of the trustworthiness of the business plan," she says.

Other resources include  LivePlan  and  Bizminer .

Additionally, consider getting help from professionals, especially regarding  regulatory or legal issues  and financial planning. You want to get it right, especially if you will use your business plan to secure bank or investor funding.

After you've written the plan, don't tuck it away. Think of it as an organic document that grows with the business. For this reason, you'll want to update and refine it as you learn and succeed.

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Starting a law firm can be a rewarding and lucrative venture, but it requires careful planning and strategy. A well-crafted business plan is a crucial tool for any law firm looking to establish itself, secure funding, or grow its practice. The business plan will serve as a roadmap, outlining the law firm’s objectives, strategies, and unique selling proposition

Why Every Law Firm Needs a Business Plan

A well-structured business plan is imperative for every law firm, regardless of its size or specialization. While legal expertise is undoubtedly crucial, having a clear vision and strategic direction is equally essential. A business plan serves as a guiding light, defining the firm’s mission, values, and long-term goals. This clarity is vital for aligning the entire firm towards a common purpose, ensuring that everyone understands the objectives and the path to achieving them. Without a business plan, a law firm may find itself navigating uncertain waters, reacting to circumstances rather than proactively pursuing its ambitions.

The Key Components of a Law Firm Business Plan

A well-structured law firm business plan consists of several key components, each playing a crucial role in guiding the firm’s operations and ensuring its long-term success. Here are the essential elements of a comprehensive law firm business plan:

• Executive summary
• Law firm description
• Market analysis
• Organization and management
• Services 
• Marketing Strategy
• Financial plan
• Start-up budget

Section One: Executive Summary

The executive summary is arguably the most critical section of your law firm’s business plan. While it appears at the beginning, it is often written last, as it serves as a concise yet comprehensive overview of your entire plan. This section should capture the reader’s attention, providing them with a clear understanding of your law firm’s essence, mission, and what to expect from the rest of the document. In your executive summary:

• Introduce your law firm: Briefly describe your law firm’s name, location, and legal specialization.
• Mission and vision: State your firm’s mission and vision, highlighting your commitment to serving clients’ legal needs effectively.
• Your unique selling proposition: Clearly state your USP, and present what is unique about your firm that will ensure success.

The executive summary sets the stage for your entire business plan. It should be a concise yet compelling introduction to your firm’s mission, values, and potential. If crafted well, it can grab the reader’s attention and encourage them to explore other sections in detail. If you feel overwhelmed by this, you can write this section last. 

Section Two: Law Firm Description

This section of your business plan provides a deeper dive into your firm’s background, history, legal specializations, and legal structure and ownership. This section should provide a concise yet informative overview of your firm’s identity and history. Here’s what this section should cover:

• Mission Statement: Briefly reiterate your law firm’s mission statement. This statement should encapsulate your firm’s overarching purpose and guiding principles.
• Geographic Location: State out the physical location of your law firm’s office(s). This should include the city or region where your primary office is situated.
• Legal Structure and Ownership: State the legal structure of your law firm, whether it’s an LLC, S-Corp, or another legal entity. This choice is a fundamental aspect of your business model, influencing ownership, liability, and taxation. If your firm’s ownership is not that of a sole proprietorship, provide details on the ownership structure. Explain how the chosen structure aligns with your firm’s business model, decision-making processes, and long-term goals.
• Firm History: Provide the history of your law firm. Highlight key milestones, achievements, and notable moments in your firm’s journey. If your firm is well-established, briefly summarize its history, showcasing your accomplishments and contributions to the legal field.

Remember that brevity is key in this section. Don’t spend too much time, just touch on important points and achievements. 

Section Three: Market Analysis

A well-conducted market analysis will not only demonstrate your understanding of the legal industry but also inform your law firm’s strategies and decision-making. It goes beyond understanding your competition; it delves deep into your potential clients’ needs and expectations. 

Through market analysis, you can segment your target market based on demographics, industry, legal needs, and preferences. This segmentation allows you to tailor your services to meet the specific needs of different client groups. It also helps you identify the pain points and challenges that potential clients face. By understanding their concerns, you can offer solutions that directly address these pain points.

Your market analysis should also reveal the pricing strategies of your competitors. By benchmarking your pricing against theirs, you can position your services competitively. You can choose to price higher if you offer unique value or lower if you aim to attract price-sensitive clients. Your market analysis should reveal areas where your competitors may be falling short. Use this information to frame your services as the solution to these weaknesses. For example, if competitors have slow response times, emphasize your firm’s commitment to timely communication. 

Showcase your firm’s USPs that directly address client needs and preferences. If you excel in a particular practice area, have a reputation for excellent client service, or offer innovative fee structures, use these strengths to attract your preferred clientele. Ultimately, a well-documented market analysis not only informs your law firm’s business model but also guides your approach to client acquisition, pricing, and service delivery. It ensures that your legal services align with client expectations and positions your firm for success in a competitive legal industry

Section Four: Organization and Management

Image Source – Creately

This section provides a clear picture of your firm’s internal structure and leadership. Name the key stakeholders in your law firm and what they bring to the table. Highlight any unique experiences or expertise that each partner brings to the firm. This could include prior work at prestigious law firms, involvement in landmark cases, or specialized knowledge in a specific area of law. Explain how these experiences set your firm apart and enhance its capabilities. You can also include an organizational chart that visually represents your law firm’s structure. This chart should showcase the hierarchy, roles, and reporting lines within the firm. By including the names, educational backgrounds, unique experiences, and organizational chart, you paint a comprehensive picture of your law firm’s leadership and structure. This not only builds confidence in your team’s capabilities but also showcases the depth and expertise of your staff to potential clients, partners, or investors.

Section Five: Services

This section is the core of your law firm business plan. Here, you will go into detail about all aspects of your services. Present in simple words:

• The problem(s) your law firm is addressing and your approach to how to alleviate those pain points? Answer these questions, and provide in detail how your firm is in the best position to tackle this problem. 
• The solution(s) you are providing. This should describe how your law firm resolves your prospective market’s needs. This should include the work you do, and the benefits that each client will receive if they work with your firm. 
• Your law firm competition.  This should describe what advantages your law firm has over your competitors? What you do differently when providing your solutions and how your clients will gain additional benefits when they work with your law firm.

Section Six: Marketing Strategy

As you craft your business plan, keep these four essential questions in mind:

• What Is Your Firm’s Value Proposition? Clearly define what sets your law firm apart from others. This should guide your marketing and sales strategies, emphasizing the unique value you offer to clients.
• Who Is Your Target Audience? Identify your ideal client profile. Understanding your target audience helps tailor your marketing efforts to reach those most likely to benefit from your services.
• What Are Your Growth Goals? Set specific, measurable growth goals for your firm. These goals should inform your sales and marketing strategies, outlining how you plan to achieve them.
• How Will You Measure Success? Determine key performance indicators (KPIs) to measure the success of your marketing and sales efforts. Whether it’s tracking client acquisition rates, website traffic, or revenue growth, having measurable metrics will help you gauge your progress and make informed adjustments.

It is also valuable to perform a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to assess your law firm’s internal and external factors. Describe your online marketing efforts, including your website, social media presence, and email marketing campaigns. Explain how you plan to leverage marketing  to reach and engage potential clients effectively. You should also define your pricing structure and fee arrangements. This may include hourly rates for specific legal services, retainer agreements for ongoing representation, or flat fees for standardized services. 

Section Seven: Financial Plan

If you want to expand your law firm and ensure a steady income, it’s essential to create a financial strategy for your practice. While you might not have all the answers regarding your firm’s finances, provide comprehensive details. Your goal should be to establish a financial plan, particularly for the initial year of your firm’s operation.

Provide comprehensive financial projections that cover the anticipated income, expenses, and cash flow for your law firm. These forecasts should offer a clear picture of how your firm expects to perform financially. You should also Incorporate income statements, which show your firm’s revenue and expenses, balance sheets that detail your assets and liabilities, and cash flow projections, which illustrate how money moves in and out of your business. These financial statements offer a holistic view of your firm’s financial health.

Explain the assumptions underlying your financial projections. This may include factors like growth rates, market trends, client acquisition strategies, and pricing models. Describe your strategies for achieving growth and how they translate into financial outcomes. This section is critical for demonstrating your law firm’s financial preparedness and sustainability. Investors, lenders, or partners will scrutinize these sections to assess the viability of your firm, making it essential to provide detailed and well-supported financial information.

Section Eight: Start-up Budget

When developing a business plan for your law firm, it is essential to create a realistic startup budget. This involves carefully considering various initial and ongoing expenses and factoring them into your revenue objectives. Here are some instances of expenses to incorporate into your budget:

• Hardware costs, such as laptops, printers, scanners, and office furniture.
• Office space expenses, whether you plan to rent space or work from home.
• Malpractice insurance fees.
• Staff salaries, including potential hires like administrative assistants or paralegals.
• Utility expenses, covering phone and internet services, among others.
• Expenses on practice management software or other tech tools

After itemizing these costs, review them thoroughly. Clearly state the total amount of funding you require to start and sustain your law firm. Explain how this funding will be allocated, including how much goes into covering startup costs and how much is reserved for ongoing operations. Be specific about the purpose of each funding component. 

Additionally, explore tools and solutions that can streamline non-billable tasks, freeing up more time for your legal practice. This not only enhances your overall productivity but also allows you to allocate more time to your legal practice. One exceptional solution that can significantly benefit your law firm operations is a legal practice management software. 

DigitsLaw: The Legal Practice Management Software for Law Firms

DigitsLaw is an all-in-one practice management software that streamlines and simplifies the day-to-day operations of a law firm. Whether you are a small firm or you have law firms in major cities, DigitsLaw can meet the unique needs of your legal practice. Our simple and intuitive tool offers a wealth of features that can make a substantial difference in the success and efficiency of your firm.

Here’s how DigitsLaw can help your new law firm scale:

• Effortless Case Management: DigitsLaw simplifies case management by centralizing all your client information, documents, and communications in one secure location. This ensures that you have easy access to everything you need, right at your fingertips.
• Time Tracking and Billing: With DigitsLaw, tracking billable hours and generating invoices is seamless. You can accurately record your time, expenses, and activities, allowing for transparent and error-free billing processes.
• Conflict Check: DigitsLaw provides a robust conflict check system that assists law firms in maintaining ethical standards and preventing conflicts of interest. By incorporating DigitsLaw conflict check capabilities into your law firm’s workflow, you can enhance your due diligence processes, reduce the risk of conflicts of interest, and uphold the highest ethical standards in your legal practice. 
• Client Collaboration: Foster better client relationships through DigitsLaw’s client portal . Clients can securely access case information, share documents, and communicate with your firm, enhancing transparency and trust.
• Legal Document Management: Say goodbye to the hassle of paper documents and disorganized files. DigitsLaw enables efficient document storage, organization, and collaboration, saving you time and reducing the risk of errors.
• Secure and Compliant: DigitsLaw prioritizes security and compliance, ensuring that your client data and sensitive information are protected at the highest standards.

By leveraging DigitsLaw’s capabilities, you can significantly reduce administrative overhead, minimize errors, and provide a more streamlined and responsive experience for your clients. It’s a strategic investment that will pay dividends as your firm grows and prospers.

Sample Business Plan and Fillable Template

If you’re in the early stages of creating your business plan, we’ve prepared an example that can serve as a reference. You can also download a blank version of our template here. Remember to tailor your plan to your specific requirements and objectives. 

Download your copy of our law firm business plan template HERE

Final thoughts.

In conclusion, crafting a law firm business plan is not just a formality; it’s a roadmap that guides your firm toward success. Whether you’re launching a new law firm or seeking to revitalize an existing one, a well-thought-out plan helps you.  From defining your firm’s mission and values to conducting a thorough market analysis every section of your plan plays a crucial role in shaping your law firm’s journey. It’s not just about impressing potential investors; it’s about setting clear goals, making informed decisions, and ensuring that your firm is well-prepared for the challenges and opportunities that lie ahead.

As you start planning, remember that your business plan is a living document. It should evolve and adapt as your firm grows and the legal industry changes. Regularly revisit and update your plan to stay aligned with your mission, serve your clients better, and achieve your long-term vision.

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How To Start a Business in Switzerland: The Ultimate Guide

While only certain sections in the cantons of the Confederation are more heavily regulated, it is relatively simple to start a business in Switzerland. 

An individual may create an ordinary partnership without much concern for the technicalities. After the registration process, the business owner will need a UID ( Unique Enterprise Identification Number ), and they’ll pick a suitable business structure. Keep reading for more information on how to start a business in Switzerland. 

How To Start a Business in Switzerland?

Though many people are interested in how to start a new business in Switzerland, the first thing you do is determine whether your service or products are desirable. Who are your competitors? Can your business withstand the test of time?

You’ll need to do a bit of research to determine the feasibility of your business idea . After gathering, analyzing, and evaluating the market and the information you collect, you can develop your business goals. 

Questions to consider before starting a business in Switzerland

Some questions to consider are:

• Is it easy to start a business in Switzerland, and are you ready to do the necessary work?
• How much money do you need to start a business in Switzerland?
• Which industry is best in Switzerland, and can you be successful there?
• What service or products are you offering?
• How can you protect your business idea?
• Is there a market for your service or products?
• What are the necessary skills to run your business?
• Is there a lot of competition?
• How can you train your employees?
• What difference will you make in the market?

Swiss business structures

Single-owner company

A single-owner company is a typical structure chosen by individuals that will work for themselves. Small businesses , freelancers, and individual entrepreneurs should choose this structure. One individual likely runs the company, and they must be a Swiss resident. Their name has to be a part of the business name, and they have unlimited liability.

General partnership

This general partnership structure involves a group of people that operate a commercial business. It’s like a sole proprietorship, except there are multiple people involved. There isn’t any limited capital required, but everyone has to be a Swiss resident, and the company must be in Switzerland. Also, one of the partners’ names has to be in the company name. 

Limited partnership 

A limited partnership is rare and is a form of a general partnership. The difference is that general partners share unlimited liability, whereas limited partners are only liable for a certain amount. This company must register with the Chamber of Commerce.

Corporation/Joint-stock company (AG/SA)

The most famous structure for companies recognized as legal and independent entities is the ( AG/SA ). A director or a board member must be a Swiss legal resident with signatory rights. Or, two board members can have joint ownership and be Swiss residents. 

Limited liability company (GmbH/Sàrl)

An LLC requires that all of the company members have to participate in the operation and management of the company. Members are, however, allowed to transfer decision-making rights to non-members. Plus, they also have the option to be your own registered agent , streamlining administrative tasks seamlessly without feeling compelled. It’s less expensive to start this type of company, and all shareholders must register with the Chamber.

A subsidiary is an independent and legal company that has an association with a foreign institution. They generally function more like a Swiss company, and it can appear as an LLC or a corporation.

This structure is a section of the headquarters that operates outside the country. A branch legally depends on a foreign parent company but pays Swiss taxes independently as a Swiss company would. The parent company assumes all liability. One member of this structure must be a Swiss resident. 

Starting a business in Switzerland as a foreigner

Can you start a business in Switzerland as a foreigner? Yes! Moving to Switzerland as a worker dictates that you uphold some requirements. More specifically, Switzerland has a rigid allocation for workers wishing to move to the country. However, there’s another option whereby you can set yourself up as a freelance worker or self-employed. But you have to be a Swiss resident, have a partner who’s a Swiss resident, or have a Swiss legal entity in order to start a business in Switzerland.

Accounting Requirements for Businesses in Switzerland

The following entities don’t have to keep accounts on the receipts and disbursements as well as their financial position:

• Foundations and associations with no obligation to register with the commercial register
• Foundations exempt from commercial register according to the Swiss Civil Code
• Partnerships and sole proprietorships that made sales revenues of less than CHF 500,000 in the last fiscal year

Auditing Requirements for Businesses in Switzerland

All companies fall under the scope of the three kinds of Swiss audit:

• Ordinary mandatory audit: more prominent companies are generally subject to this audit.
• Limited audit: if a company fails to fulfill two of the three mandates, it will have a limited audit (turnover of fewer than 40,000,000 CHF, less than 250 full-time employees, and a balance sheet of fewer than 20,000,000 CHF).
• No mandatory audit: if a company has a limited audit and has less than ten full-time employees and the shareholders all agree, it is unnecessary to have an audit.

How Much Does It Cost To Establish a Business in Switzerland?

Administrative costs are relatively inexpensive to start a business in Switzerland. They start between CHF 700 to over CHF 1,000 for sole proprietorships and a limited liability company. Finally, a private limited company can go over CHF 15,000.

Swiss Taxes for Businesses

Companies in Switzerland have to pay corporate income tax to the government. The company gets charged on the taxable profits they accrued in Switzerland. Moreover, the charges are tax-deductible, which means the flat rate of income tax federally happens to be 8.5 percent; however, in actuality, the total amount is about 7.8 percent of a company’s taxable income in a given year.

Generally, companies in Switzerland pay a total corporate tax rate of anywhere between 11.9 percent and 21.6 percent. However, tax deductions from both community taxes and cantonal could see that amount drop by several percent. 

Training Your Employees

Training employees is an important aspect of any organization’s growth and development. One way to effectively train employees is through the use of a learning management system (LMS). An LMS is a software application that can be used to deliver, track, and manage training programs and materials. It allows employees to access training materials and complete courses at their own pace, and provides a centralized location for storing and tracking progress. Using an LMS can be an effective way to ensure that all employees receive the training they need to perform their job duties effectively and to continuously improve their skills and knowledge.

How Long Does It Take To Set Up a Business in Switzerland?

It takes about two to four weeks to complete the registration process of a Swiss company. The company’s start-up capital has to already be in a bank account . After this is complete, the company becomes a legal entity.

Bottom Line

Overall, it is a manageable task to develop a company in Switzerland. Figuring out how to start a business in Switzerland as a foreigner can be a little more complicated because of the residency status. Still, an aspiring entrepreneur can do it with the right amount of planning and legal action.

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University of Central Florida

Founded as a public institution in 1785, UGA boasts an illustrious history in higher education. Today, Georgia's flagship university offers online programs to make a UGA degree more accessible. The online courses limit class sizes and use the same high academic standards as on-campus classes. UGA offers an online bachelor's degree in special education and multiple online graduate programs in education. Degree-seekers can also earn master's degrees in community nutrition, international biomedical regulatory sciences, emerging media, and avian health and medicine. Other available online master's programs include business, technology, and social work.

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University of Georgia is regionally accredited by the Southern Association of Colleges and Schools Commission on Colleges (SACSCOC).

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Business Plan – Legal and Financial Aspects

For a business to run smoothly and have security for its future, a business leader needs to cover all the financial and legal aspects involved in running a business. Without having an understanding of this, the business will surely fail. These areas help protect the company and its employees as well as its future success in a sense of knowing what areas it needs to improve on financially as well as areas on legal matters that will not be an issue within the business. To cover all these I shall first describe and explain the different types of businesses, such as a sole trader, partnership and a limited company and go on to explain their different legal aspects as well as the legal aspects in general, things like; contracts,  human rights, trademarks and employment laws.

Sole Trader

A sole trader is a person who sets up and owns their own business. They may have other people working for them but they will always be the owner. So success all depends on the owner himself and depending on his abilities the progression of the business or the downfall of the business from irrational decisions. A benefit of being a sole trader is that after all tax has been deducted, what’s left is entitled to the owner. the benefit of having full control over business is that decision making is easier and quicker and decisions don’t need to be discussed like in a partnership or limited company with other co-owners. However this could also be seen as a downside because decisions are only made by the owner it could be difficult to make the right decision and there is nobody else to help with working through tough decisions.

The major setback of being a sole trader is the fact that the owner has unlimited liability which means that the law sees the owner and the business as one, this suggests that if the business should go into debt, the owner will be liable towards paying those debts back. Also if a customer sues the business, they sue the owner. A lot more input is needed from the owner as it is one person and the workload of the owner cannot be shared like in a partnership.The positive legal aspect of a sole trader is that all the info is kept private and so the owner can keep the business very personalised and push innovation, however once business is no longer able to thrive from the owner from causes uncontrollable such as death, the business ceases to continue.

Partnership

A partnership is a company owned and run by two or more people. There are two different types of partnerships; general partnerships and limited partnerships. In a general partnership, the partners manage the company and take on the responsibility for the partnership’s debts and other obligations. A limited partnership has both general and limited partners. The general partners own and operate the business and assume liability for the partnership, while the limited partners serve as investors only; they have no control over the company and are not subject to the same liabilities as the general partners. limited partnerships are generally not the best choice for a new business because of all the required filings and administrative complexities. Partners are able to share the investment and success as well as the failure of the business. A major advantage of a partnership  is the tax “treatment”, this means a partnership doesn’t pay tax on its income but “passes through” any profits or losses to the individual partners.

Personal liability is a major concern in a general partnership. Like sole traders, partners are personally liable for the partnerships obligations and debts therefore each partner has the responsibility to act on behalf of the partnership. Partnerships are generally more expensive to set up and run because they require more legal and accounting services. Therefore a partnership agreement should be drawn up to show how business decisions should be made, how disputes should be settled  and how to resolve a buyout. The agreement should address the purpose of the business and authority and responsibility of the partners.

Limited Company

A limited company is when an organisation is set up in order to run the business. It is responsible in its own right for everything it does and its finances are seen as separate from the finances of the owners, suggesting it has limited liability. Any profit a limited company makes is owned by the company after it pays corporation tax.

Every limited company has “members”, these people or organisations own shares in the company. Shares are seen as a percentage of the rights to the company. Directors are responsible for running the company and the shareholders responsibility’s for the companies financial liabilities are limited to the value of shares they own.

A unique aspect of a group of people working together is called a Co-operative. These businesses come together to meet common needs and aspirations of its members, sharing ownership and making decision making based in democracy. They are not about making big profits for its shareholders but instead their goals are to create value for its customers. This is what gives it its unique characteristic as a business.

Limited Liability

This is a type of liability that does not exceed the amount invested in a partnership or limited company. It has a big advantage with investing in publicly listed companies. While a shareholder can participate wholly in the growth of a company, the shareholders liability is restricted to amount invested within the business. In a partnership, the limited partners have limited liability while the general partners have unlimited liability. The limited liability feature protects the investors personal assets from the risk of being in debt to any creditors in case the company becomes insolvent.

In the context of a private company, incorporation can provide its owners with limited liability, since an incorporated company is treated as a separate and independent legal entity. Limited liability is especially desirable when dealing in industries that can be subject to massive losses, such as insurance.

Memorandum of Association

This is the document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company in the United Kingdom, Ireland, India, Bangladesh, Pakistan and Sri Lanka, and is also used in many of the common law jurisdictions of the Commonwealth.

It is basically a statement that the subscribers wish to form a company, have agreed to become members and, in the case of a company that is to have a share capital, to take at least one share each.

When considering which legal status a business owner wants his/her business to be, the next thing to consider, which is extremely important, is the legal aspects of a business. Without these the business would be seen as illegal and not compliant to laws of the country.

Health & Safety

This is a crucial area of any business. A business needs to ensure they abide by the local health and safety regulations. They are in place not only to protect customers but also safeguard the business against any lawsuits or court actions. If five or more members of staff are employed the business must have a drawn up health and safety policy in place. Staff need to be trained in health and safety duties, and the business would be responsible for any effect it may have on the health and safety of employees and members of the public.

Fire Precautions

A business must have basic requirements for minimising the risk of fires. These include:

• Fire resistant doors and walls.
• Fire alarms
• Emergency Lighting
• Staff training

The business must ensure premises meets standards set by the regulations of the country and fire risk assessments must be carried out, the assignment should incorporate:

• Identification of potential fire hazards
• Identify any people who may be at a particular risk.
• Evaluate existing risks and take necessary stops to remove or reduce risk.
• Draw up an emergency plan that staff are familiar with
• Review assessment regularly, particularly of any changes increase risk.

Employment law and age

This is necessary for a business to ensure compliance of age and employment related laws applicable to the type of business. It is the body of law that governs the relationship between employer and employee. It is a key component of the business, therefore it is the employment rights that are bestowed on the employer.

It amounts to a code of conduct by which employers must abide by and acts to protect workers against various ways of discrimination. It also dictates when an employer is justified to dismiss an employee. Failure to abide by employment law by a company could result in serious repercussions.

Specialised employment solicitors with the knowledge of employment law will be called to represent both sides of an employment tribunal if the need of a tribunal ever happened.

Planning Permission

This is permission to be allowed to build on land or change the use of land or building/s. The occupier of any land or building will need a title to that land or building, this represents ownership , but will also need a planning title. Certain types of operation such as routine maintenance of an existing building are specifically excluded from the definition of development.

Solicitor and Accountant

A solicitor is a lawyer who traditionally deals with any legal matter including conducting proceedings in court

An accountant is a practitioner of accounting, which is the measurement, disclosure or provision of assurance about financial information that helps managers make decisions about allocating resources.

Legal Liabilities

Legal liability is a term applied to being legally responsible for a situation,and has a contractual agreement involved. A business has to be legally responsible for any situation, especially if terms of the contract is not fulfilled. It is the companies obligation to act responsibly or face compensatory penalties.

This is the protection of the company from any risks that the company might face. Its like normal car or house insurance except that its insuring your company. This helps secure growth and progression of the business and that any set backs wont keep the business from being unable to succeed.

Most people are familiar with insurance for their personal belongings, homes and cars. This coverage protects a person financially in case of an accident or disaster to their belongings, homes or cars. We are familiar with these types of insurance because it is natural for most people to realize that they would be unable to replace their home tomorrow if there was a fire or to replace their car if there was an accident.

The same principle applies to business insurance. The principle is one of risk. There are risks that are so destructive that it makes sense to plan ahead and manage the risk, sometimes these risks may never happen , but it is always good to have a financial plan in case they do happen. In our personal lives these risks are often more easily foreseeable.

For our businesses, however, a company might not consider risk or believe that the risks cannot be managed and so turn a blind eye hoping that nothing happens. They forget that if the business is not operating, there is no cash flow. Business insurance involves spreading and managing the risk among many business owners. Insurance companies take in  payments from many covered businesses, invest those payments, and create a pool of money to pay out to a business if that business has a covered loss. Insurers have developed mathematical models to determine what chance there is of a risk occurring and what premiums the insurer must charge to stay in business and make a profit. Insurers have also developed around eight to nine general categories of losses that seem to happen with more frequency. The insurers developed particular policies to address those types of losses.

Software license 

This is a legal instrument governing the use or redistribution of software. A typical software license grants a user permission to use one or more copies of software in ways where such use would be seen as copyright infringement of the software. They typically vontain provisions which allocate liability and responsibility between the parties entering into the agreement.

IP strategy

This is the business game-plan. It generally should not be complicated and should be something for the company to turn to when planning. From a legal perspective, there are four types of intellectual property. The four legally-defined categories of intellectual property are:

• Patents; when the company registers the invention or idea with the government. The company would gain the legal right to exclude anyone else from manufacturing or marketing it. Patents cover tangible things. They can also be registered in foreign countries, to help keep international competitors from finding out what the company is doing. Once you hold a patent, others can apply to license your product. Patents can last for 20 years.
• Trademarks; A trademark is a name, phrase, sound or symbol used in association with services or products. It often connects a brand with a level of quality on which companies build a reputation. Trademark protection lasts for 10 years after registration and can be renewed.
• Copyrights; Copyright laws protect written or artistic expressions such as – novels, poems, songs or movies. A copyright protects the expression of an idea, but not the idea itself. The owner of a copyrighted work has the right to reproduce it, to make derivative works from it, like movies based on a books, or to sell, perform or display the work to the public. The material doesn’t need to be registered to hold a copyright, but registration would be important if the company decides to sue for copyright infringement. A copyright lasts for the life of the author plus another 50 years.
• Trade secrets; A formula, pattern, or compilation of data that gives the user an advantage over competitors can be seen as a trade secret. To protect the secret, a business must prove that it adds value to the company, that it is actually  a secret and that it benefits the company in some way, and that appropriate measures have been taken within the company to safeguard the secret, such as restricting knowledge to a select handful of executives. Coca-Cola, for example, has managed to keep its formula under wraps for more than 117 years.

But IP can also be something broader and less tangible than these four protected classes: it can simply be an idea. If I have a eureka moment during my morning shower and then apply my new idea to my business, that could also be seen as intellectual property too.

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