800 Town & Country Boulevard • Suite 500 Houston TX 77024 Located in CityCentre
FORMATION AND OPERATION | Setting Up Your Business
Licenses and permits—state and local governments require businesses to apply for a variety of permits, so you should contact the appropriate state and local agencies to apply for any permits or licenses that may be required for to be able to run your business legally. In Texas, you should check with the following:
Financing your operations: You have two basic sources of funds for financing your business, your own money and other people’s money (“OPM”). The latter can come in two forms
Equity—from others who join you in your business as co-owners and share with you the risk of losing your investment if the business fails. The best example of equity financing stock shares of corporations.
The primary question will be how much of the owner’s rights will the owner need to share to bring sufficient funds into the company from investors.
Note that typically at least some of the initial organizers of a corporation will provide “sweat equity”— expertise, management skill and ideas in addition to or instead of financial contributions.
Shares can be issued either through private placements or public offerings, but regardless of which type of offering is chosen, the issuance and transfer of corporate shares is highly regulated by federal and state laws. So when choosing a corporate form of business, you absolutely must seek professional advice. These laws are complex and the penalties for violations of these laws are strict and the liability to investors can be enormous.
Debt—from others who led you money and expect to be repaid, with interest, regardless of whether the business succeeds.
Obtaining space and equipment:
Unless you already own a building for your business, you will need to locate and lease or buy a suitable place where you will operate. This will involve legal transactions and contracts, either in the form of:
A written lease, which can be fairly complex, or
A contract to buy commercial property
Either way, you should seek professional advice from a competent realtor and a lawyer. You will need advice about how local ordinances and regulations will affect the licensing, location, promotion and operation of your business.
The same is true when it comes to outfitting your business. You may already own some of the furniture, equipment or tools necessary to operate, but to the extent you don’t, you will undoubtedly have to sign contracts for leasing or purchasing what you need.
Staffing: Perhaps you can do your business all by yourself, but if you can’t, you will need to hire the help of others either as employees or independent contractors.
Each choice has advantages and disadvantages that are best discussed with your specific business in mind.
If you are contemplating hiring others to work with you in your business, visit our Employers page.