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MAINE START-UP BUSINESS: THE LEGAL ENVIRONMENT

MAINE START-UP BUSINESS:  THE LEGAL ENVIRONMENT The legal environment of business is complex and ever-changing.  Whether your start-up business is home-based, or whether you have several business locations throughout the State, it is important to understand some of the legal challenges facing entrepreneurs in Maine.  Here are some legal considerations that may help navigate the exciting process of becoming a Maine business owner – and help you to avoid some of the pitfalls that threaten the unaware. Business Plan A business plan is a formal written document that not only outlines the goals and objectives of your start-up business, but also defines the processes to be followed and the challenges to overcome in order to reach those goals.  A business plan should be the first step in moving forward with a start-up business idea.  Not only will you need a business plan for financing purposes, but you may also work out some of the uncertainties and better develop some of your abstract ideas.  And the process of creating the plan will motivate you and help you envision your business succeeding! For business plan tips and samples, the Finance Authority of Maine has a helpful website:  http://www.famemaine.com/files/Pages/business/Reference/Business_Plan_Basics.aspx. Licenses and Permits Licensing and permitting requirements vary greatly, of course, depending on the type of trade or profession involved.  From doctors, to lawyers, to electricians, to hair and nail technicians, to funeral directors, many trades require Maine State licenses. In addition, Maine and its municipalities regulate and apply special taxes to various businesses for revenue raising and consumer protection purposes.  For instance, a sales permit is required for selling retail products in...

STARTING YOUR OWN BUSINESS ENTITY: KNOW THE BASIC LEGAL FRAMEWORK

Starting Your Own Business Entity:  Know the Basic Legal Framework Whether to generate additional income, be one’s own boss, create flexible hours around child care, or fulfill a dream of one’s own, many folks, especially in Maine, start their own business.  As they set up these small businesses, many people fail to take advantage of available options which are open to them and which may limit their personal and tax liability. This article is intended to discuss some of those legal options available to small business owners and to briefly explain the pros and cons in adopting these various business entities. I.                   SOLE PROPRIETORSHIP Most people who begin a small individual business adopt a sole proprietorship as their business entity.  They often do this without planning to do so and simply form a sole proprietorship by default. A sole proprietorship is exactly what it says it is.  Any person who uses their labor or ideas for the purpose of generating profit, and does so under their own personal ownership, has formed a sole proprietorship.  There are no formal requirements to form a sole proprietorship, and any income which is generated by the individual’s labor will be attributed to them personally through their own social security number. While many people operate this type of business under their own name, some people also adopt a name for the business.  In legal terms this is known as a “dba”, which stands for “doing business as”.  While the business enterprise has a name separate from the individual, all of the tax and personal liability still flows directly to the individual. Some of the...

BUSINESS CONTRACTS AND PROVISIONS TO IMPROVE COLLECTION OF RECEIVABLES

BUSINESS CONTRACTS AND PROVISIONS TO IMPROVE COLLECTION OF RECEIVABLES During these times of economic turmoil, small businesses need to protect themselves against the risk of non-payment of customer accounts.  The following is advice on how to proactively manage credit through business contracts and other tools: Put Your Business Deals in Writing When negotiating a financial transaction, whether it is for the provision of services, the sale of goods, or the establishment of a business partnership, it is important to put the terms of the deal in writing.  In other words, it may be wise to hire an attorney to draft the appropriate business contracts.  If the parties to a business deal come to the table beforehand to discuss the terms of the agreement (the scope of the parties’ duties, the monetary consideration, etc.), and then reduce that discussion to a written contract, it is less likely that a payment dispute or other difference of opinion will arise later on. Through such a process, the parties will have already fleshed out any misunderstandings, before committing to the deal. Also, if a dispute should subsequently arise, you have documentation as to the parties’ agreement and you will not have to rely on memory. Have Attorneys’ Fee or Late Fee Provisions in Contracts Often times, when financial distress hits, customers may only be able to pay certain of their regular monthly bills. Give your customers incentive to make your bill a priority by charging late penalties. To do this, the contract, lease, or other operative document must contain specific language that sets forth the applicable late payment penalty schedule. Likewise, to the...