By Chris Gatewood
It is easier than ever to make and sell things. You can bang out a prototype of your widget with a 3D printer, by hand, or in a hackerspace that gives you access to its gear. You can connect with a manufacturer in the U.S. via Maker’s Row or offshore through the other side of the planet. And of course, there is Etsy, a very accessible marketplace for the crafty.
Those who are hobbyist makers and tinkerers should skip the rest of this article. But if you desire to turn your creations into a part- or full-time business, read on for four important legal and business “to do” items.
Form a Company
Turn your business into a legal entity, even if you are the only owner. There are companies out there like yourvirtualofficelondon.co.uk/limited-company-formation/ who can help with company formation, so you don’t have to do it totally alone without any help. Creating a separate entity will require you to establish freestanding bank accounts, contracts, and relationships. By dividing the business from the individual owner(s), its viability or lack of viability will be more apparent. It is also the cheapest form of liability insurance you will ever buy. Talk to a lawyer or accountant about whether an LLC, S-Corp, or C-Corp makes the most sense for what you have planned.
Document Your Partnerships
Your best opportunity to get the details worked out with your co-founders is while everybody is still happy and looking forward. At a minimum, you need to figure out and document who owns what percentages and voting rights, how everyone will contribute (and how much), how everyone will get paid (and how much), and what happens if someone quits, gets fired, gets hit by a bus, or wins the lottery and disappears. It’s like asking for a pre-nuptial agreement on the wedding day. Do it anyway.
Similarly, before you commit to any parts or material suppliers, outside collaborators, sales channel partners, or other input and output partners, make sure you understand the deal. Lock in the initial promises and pricing wherever possible, so that your commitment is not met with a price hike.
Identify Intellectual Property
Whatever you make, the company and product will have a brand name and will build recognition over time. These names are your trademarks, and you will want to protect them. Non-functional elements of your product’s designs can also have trademark and copyright significance. If you believe you are inventing something truly new or making technological improvements, and if you cannot find anything like it, consult a professional Patent Attorney and get an opinion on patentability. Many business founders have lived to regret their failure to identify and protect relevant IP early.
Sort Out Sales Channels
How are you going to get to market? Brick-and-mortar distribution? Direct e-commerce sales? If you are making commitments for any period of time, you should understand all of the terms. Negotiate them wherever possible. This means, among other things, always asking the “percentage of what?” question whenever a deal includes a percentage component.
Of course, nowadays, many businesses prefer to use e-commerce sales to reach their customers. This is usually because of the more people they can attract towards their products. When selling directly from your e-commerce site, it’s important to make sure the process is as easy for the customer as possible. Many people consider using software like Samcart on their sites, perhaps reading this samcart review can help you figure out if it’s the best one for your site or not. Customers enjoy being able to purchase products from one direct page, instead of having to go through multiple landing sites first. With this in mind, something like Samcart might be useful.
Don’t stop making. Don’t even slow down. But when your back gets tired from hunching over a workbench, take a little break and remember that some time spent on business and legal matters is a necessary part of the successes that makers can make.