MAKING IT LEGAL
By Ryan P.C. Lawson, Esq., Small Business Advocate
IF YOU’RE A MAKER, YOU PROBABLY HAVE
a toolbox. If you’re a careful maker, you have
some safety tools in that toolbox, like safety
glasses and earplugs. Maybe you have rubber gloves if you work with chemicals. There’s
another safety tool that makers should have
at their disposal: a company.
“Company” is a word that garage-based
makers might not want to be associated
with. It may bring to mind large, faceless
corporations that care more about profits
than innovation or creation. But the people
who started these companies did it as a way
to protect their owners and investors.
Just as you protect your eyes and hands
with glasses and gloves, you protect your
assets with a company. Companies give us
the concept of limited liability: a company’s
owner is generally only liable for the amount
that they invested in the company. This is
an incredible protection, because no matter
how careful you are, accidents happen.
Let’s say you design and sell remote-controlled lawn mowers. What if RF interference causes the mower to go off course?
Even if an accident isn’t your fault, someone
may be injured or even die. We live in a world
where no one likes to take responsibility for
their actions, so they may come looking
for you because your name is on it.
If you’ve made a company, a customer
generally has to go after the company. Of
course, there are some exceptions to this and
some rules you have to follow to make sure
this happens. A company is a person under
the law, and though you control it, it isn’t you.
That means the only thing someone can go
after is what the company owns. So, while
company-owned tools might be at risk, your
house and your car may be protected.
Your company might be just you as the
inventor, or you and some close friends who
share an idea. If you have multiple people,
the rules you set up on how you run your
company can prevent arguments about how
profits are shared, who gets to vote on important decisions, and how votes are counted.
There are lots of different kinds of companies, such as the traditional company, the
LLC, and the S corp, and these vary depending
on what state you live in. Forming a company
isn’t that hard. In most states, it just involves
filing a form and paying a fee.
Just as you protect your eyes
and hands with glasses
and gloves, you protect your
assets with a company.
While you’re not required to get a lawyer,
there are many reasons to have one help you
get started. A short conversation with a lawyer
will help guide you to the right type of corporation for your business. A good lawyer will
explain your options and offer to let you save
money by filling out the forms yourself and
give you assistance if you need it.
A business lawyer can also explain rules
you can set up internally to avoid future conflict. The lawyer will tell you how to prevent
someone going around your company to try to
get to you. Most importantly, by consulting a
lawyer now, you’ll establish a relationship with
someone you can consult if something goes
wrong or if you need some fast advice.
Protecting yourself with a company is the
best legal safety tool you can have as a maker,
and it should be in your toolbox. ;
Ryan Lawson is a Michigan lawyer. His practice focuses on
technology licensing and advising small businesses.
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