More Wisconsin-based entrepreneurs are taking the initiative to create their own business entities than ever before. And why shouldn’t they? Starting a business seems as easy as filing a form with Wisconsin’s Department of Financial Institutions (DFI).

The DFI is the filing office for creating Wisconsin corporations, limited liability companies, limited partnerships and other business types. And it’s true: Creating a business entity starts with filing a form there. There are many additional legal matters to consider when forming a business, however. Overlooking these matters can expose you to the risk of litigation, even putting your personal finances at risk.

Items to Consider When Starting a New Business

In addition to filing a form with the DFI, it’s a good idea to:

Properly prepare your operating documents. Depending on the type of business you create, you may be expected to prepare certain operating documents. These can include bylaws, operating agreements, partnership agreements or other important documents. The documents are critical. They define your organization’s operating terms and help protect your legal rights and responsibilities.

Operating agreements are especially important because they allow you to plan for the future, tackling potential problems and setting rules before trouble occurs. What happens if a member wants to withdraw from the entity? How should profits and losses be divided? How will salaries and expenses be calculated? Many people forget to ask these important questions. They only plan for success—not failure—which can mean trouble if the business faces obstacles.

Even a sole-member LLC can benefit by having a basic operating document. More and more, banks and third parties are refusing to do business with a sole-member LLC unless the member is able to provide the necessary documentation evidencing his or her role and authority.

Coordinate your entity interest with your estate plan. Your interest in your company may become one of the biggest assets you have. There are many complex legal, tax and business issues associated with passing those assets on to heirs or beneficiaries. When you make a will, living trust or other estate planning document, it is critical to consider how you want your membership interest to be distributed. It’s also essential that the operating documents for your business entity address the disposition of your business interest at your death. For example, can you pass your interest on to your heirs, or do the other members, partners or shareholders of the entity have the right to purchase your interest upon your death?

Register your trade name. You may want to consider registering the name of your business or product with the Department of Financial Institutions. You can also register labels, logos, forms of advertisements and other items. Doing so creates a public record, identifying you as the owner of the business. You are not legally required to register, but certain banks, customers and suppliers may require trade name or trademark registration as a condition of doing business with you. Registration also helps you establish your continued use of the trade name or trademark if another entity ever challenges your right to its use in the future.

Find a domain name and secure it. Now more than ever, your web presence defines your business. If you are unable to have a web presence that reflects your brand, it can cost you thousands. That’s why it is critical to investigate a domain name (URL) and secure it before someone else snatches it up.

Check regulations and licensing requirements. In Wisconsin, there are 16 state agencies that require various forms of state licensing, including permits, certificates, licenses and registrations. Businesses may be subject to additional local and federal regulations as well. For example, depending on the nature of your business, you may need an alcohol and beverage license, building and construction permit, a professional or specialty license, animal licensing or other specialized licensing. Failing to follow any one of these requirements can mean steep fines or even having to cease operation.

What to Do If You’ve Formed a Corporation

If you’ve formed a corporation, it’s important that you follow corporate formalities. Such formalities include holding board of directors meetings and shareholders meetings, creating a stock ledger, filing state and local tax returns, avoiding undercapitalization, and not commingling corporate funds with personal funds, just to name a few.

If you fail to follow through with corporate formalities, you could accidentally expose yourself to personal responsibility for business debts. The legal term for this is “piercing the corporate veil,” which allows courts to put aside limits to liability and hold a corporation’s shareholders or directors personally liable for business debts.

If this sounds serious, it’s only because it is. When it comes to taking the proper steps to create a business, it is easy to make mistakes or overlook important considerations. That is why so many people turn to an experienced business lawyer for assistance. Even if you start with a do-it-yourself approach, you can always contact an attorney when you need guidance. It is much better to seek legal advice when you have questions rather than waiting until problems arise.