Estefan Encarnacion, managing partner of EBL Law Group, appeared on the LA morning show Mañana Latina, where he provided some legal tips for people looking to start a business.
Legal Tips for Starting a Business
Starting your own business is a great way to build a financial legacy. However, as with many other things in life, following the law is a key part of the process. With that in mind, today we share seven legal tips for starting a business.
1. Know the Law
“The first thing is to get informed,” says Estefan Encarnacion, managing partner of EBL Law Group. “Get informed about your industry, get informed about the laws that apply. This way, you’ll get off to a good start, not a bad one.”
Encarnacion also offers advice for people who already have an enterprise: “If you have an existing business, the best thing you can do is to ensure that you are compliant with the law. There are many laws depending on the industry, but the owner is the person responsible for knowing what laws are those.”
“Don’t plead ignorance,” he adds. “Because in court, ignorance of the law is not a defense. If you don’t know what the law is, seek the assistance of a lawyer who can carry out a legal audit on your business.”
2. Plan Ahead
“Regardless of whether you own a business or not, if you want to leave assets to your children or loved ones, then you have to create a revocable living trust, which is different from a will,” Encarnacion observes.
“Here in the State of California, you are required to go to the court to make a will, so there are more expenses associated with it. With a revocable living trust, you get to avoid that process. This is the best you can do to ensure that your assets are passed on to your loved ones.”
Encarnacion also advises business owners to avoid unnecessary debt. “Because when you pass away, the spouse is responsible for both the assets and the debts you leave behind.”
3. Get Insurance
According to Encarnacion, insurance is important for a business “because it helps you if there’s a lawsuit.”
“As I always say, the best advice is: get an insurance policy, but don’t just look at the price; understand what coverage you’re getting.”
“You have to make sure that you are covered for any acts of negligence that could happen. You have to read the policy, and you have to do your research. Don’t choose a policy just because it’s cheap.”
4. Observe Labor Laws
Complying with labor laws is important because you want to treat your workers fairly. But also because, as Encarnacion notes, “When you own a business, you are painting a target on your back. Everyone is out to get you because they think you have the money to pay.”
According to Encarnacion, the two most common plaintiffs in cases filed against businesses are employees and customers.
So ,“It’s important for business owners to understand that nobody’s going to help them. The court won’t help them. Everyone expects you to help yourself, and the best way to do that is by getting informed.”
5. You Can Start a Business in the US even if You Don’t Have Papers
To answer one of the most common questions about immigrant entrepreneurs: If you live in the United States, you can start a business even if you don’t have papers.
“You have what is known as an LLC, or Limited Liability Company,” Encarnacion explains. “In California, you are allowed to create an LLC with just an ITIN.”
The term ITIN stands for Individual Taxpayer Identification Number. You can apply for one with the IRS.
“To have an ITIN, you are not required to be a citizen or to have a Social Security Number,” Encarnacion says.
“Those are just the first steps to take,” he warns. “It’s a bit more complicated in practice, but in this country you can own a business even if you don’t have papers.”
6. Put It on Paper
A lot of things can change after you create your business, so Encarnacion advises business owners to put all agreements between associates on paper as early as possible.
“I always tell people to sign a contract. They think ‘I have to see a lawyer, it’s going to be really expensive.’ But no, the terms can be really simple, you just have to make sure to get it in writing to serve as the base for the agreement. Then, as time goes by and things change, you can change the terms as well.”
To sum it up: “Before starting a business, take the time to sit down and sign something that dictates the terms of the relationship.”
7. It’s Never Late To Be Legally Compliant
Even if you already own a business but never took any of these steps, catching up is always a good idea.
“I know that lots of people want to improve their lives, and sometimes your personal situation forces you to do it, and very often we don’t take the time to research that information, but you have to make time for it,” Encarnacion says.
“It’s never late to be compliant if you want your business to prosper.”
DISCLAIMER: The material on this website is for general information only and is not to be construed as legal advice or opinion, and does not constitute or create an attorney-client relationship between you and EBL Law Group.
EBL Law Group: Attorneys in San Bernardino
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