Starting a business can be complicated enough without having to deal with making unnecessary legal mistakes in the process. If you’re considering starting a business in the U.S. Virgin Islands, it’s important to be informed of the most common legal problems to avoid. By taking the following tips into consideration, you can make this process go much more smoothly.
Establish a co-founder agreement
One of the first steps to take when forming a business in the Virgin Islands is to make sure you’ve created an official agreement between all of the founders. If you don’t create an agreement, you may be signing yourself up for an expensive lawsuit later on after the company has achieved financial success.
An effective agreement should identify the company’s founders, along with their roles and responsibilities, how much of the company each founder possesses and what will happen in the event that a founder passes away or leaves the company. It should also cover how ownership interests vest over time, how contributions should be made and how major decisions will be handled.
Form a limited liability entity
Running a business means automatically subjecting the owners to liability. Anything that goes wrong — a customer injury, employee discrimination or being unable to repay a debt, for instance — can leave you liable for paying back damages. If you place limits on your liability by choosing to form either a corporation or a limited liability company, all personal assets will be protected if the company loses money through bankruptcy or litigation. While you may still lose your initial investment, you can avoid losing any personal assets.
Safeguard your intellectual property
Intellectual property is one of a company’s most important assets, and if it is not protected, you run the risk of allowing your competitors to steal this property with no legal consequences. Your company’s ideas, name, logo, products and processes should be protected through patents, trademarks, copyrights, non-disclosure agreements (NDAs) and invention assignments.
Use the correct employment procedures
This is a common pitfall for new businesses. Before hiring any employees, make sure you understand the ins and outs of employment procedures including the Virgin Islands “Wrongful Termination Act”. Know the difference between an employee and a contractor, for example, and how tax withholdings and stock issuances work. It’s a good idea to work with a tax attorney or CPA during these steps. It’s best to tackle these issues early on, while the company is still small and problems can resolved somewhat quickly.
Consult a business lawyer
Although you may not want to make the investment to hire an attorney during the start-up process, the reality is that this is one of the most crucial times for your business to have sound legal guidance. By working with a business attorney to help you deal with all of your issues and questions at the beginning of the formation process, you’ll end up saving your company money by avoiding mistakes that could result in expensive legal matters down the road.
BoltNagi is a widely respected and established corporate and business law firm serving clients throughout the U.S. Virgin Islands.