Starting a business can feel daunting; you know there’s a leap to make, but you’re not quite sure where you’ll land. The good news? There are proven ways to turn a promising idea into a real business. The key is understanding the legal, financial, and strategic building blocks that make companies thrive.
Choosing Your Path
The first decision most entrepreneurs face is whether to start from scratch or buy an existing business.
According to Robert Londin of Jaspan Schlesinger Narendran LLP, this choice isn’t just about risk tolerance. “Sometimes the smart play is to acquire a business that already has infrastructure, customers, and cash flow even if it needs a turnaround. Other times, innovation is the differentiator, and you have no choice but to start fresh.”
Starting from scratch often appeals to entrepreneurs with a unique invention or an idea that disrupts an industry. You get to design the business model, culture, and brand from the ground up. The downside? It takes more time, often more capital, and involves a steeper learning curve.
Acquisitions, on the other hand, can give you a head start through instant access to an existing customer base, established systems, and brand recognition. But there are pitfalls too: hidden liabilities, cultural mismatches, or outdated systems that need expensive overhauls. Performing rigorous due diligence before an acquisition is critical to avoid inheriting legal or financial problems.
For example, buying a family-owned restaurant may provide an immediate stream of revenue, but you might also inherit labor disputes or old debt. Launching a ‘software-as-a-service’ company, by contrast, may have higher risk upfront but offers scalability without legacy baggage. Both paths are valid; the right choice depends on your resources, goals, and appetite for risk.
Picking the Right Business Structure
Choosing the right legal entity is one of the earliest (and most impactful) decisions. Options include sole proprietorships, partnerships, LLCs, S-corps, and C-corps. Each has different implications for taxes, liability, and growth potential.
- Sole Proprietorship: Easy to form, but full personal liability.
- Partnership: Similar ease of setup to a sole proprietorship, but disagreements between partners can complicate operations.
- LLC: Offers limited liability and flexibility in management and taxation. This is a popular option for small businesses and professional practices.
- S-Corp: Avoids double taxation, but is limited in the number and type of shareholders. S-Corps allow profits and losses to ‘pass through’ to shareholders but ownership is capped at 100 US individuals.
- C-Corp: More complex, but attractive to investors. C-corps are subject to ‘double taxation’ (corporate tax plus shareholder dividends), but they provide unmatched scalability and fundraising options. Venture capital funds generally prefer C-corps because they allow multiple classes of stock.
As David López-Kurtz of Croke Fairchild Duarte & Beres LLC explains, “The choice of entity drives everything from how you raise capital to how you exit the business. You need to think about your long-term vision, not just the next 12 months.”
Protecting Your Idea
For many businesses, the ‘secret sauce’ is their intellectual property (IP), which can include patents, trademarks, copyrights, or trade secrets.
- Patents: Protect inventions and processes. These are critical in biotech, manufacturing, and technology.
- Trademarks: Protect brand names, logos, and slogans.
- Copyrights: Protect creative works like software code, designs, and content.
- Trade Secrets: Protect confidential formulas or strategies, like the Coca-Cola recipe.
David Postolski of Gearhart Law LLC emphasizes the need to protect early and protect wisely: “Too many founders put off IP protections until it’s too late. If your product is truly unique, you need to decide: do I patent, trademark, or protect this as a trade secret?”
Industries approach IP differently. In pharmaceuticals, patents are king; billions ride on protecting a single drug formula. In software, speed to market often outweighs patent protection, so trade secrets and copyrights are more common.
The bottom line: Identify what makes your business valuable, then choose the right IP strategy before competitors copy you.
Financing Your Business
No matter how good the idea, at some point every founder faces the same question: ‘Where will the capital come from?’
Gary Chodes of The National Law Review put it bluntly: “You need to know not just how much capital you need, but how long it will last. Burn rate kills more startups than competition does.”
Popular funding sources include:
- Personal Assets: Tapping into 401(k)s or home equity can work but puts personal security at risk.
- Friends and Family: Accessible but risky for relationships if the business fails.
- Banks: Traditional but collateral-driven; not all startups qualify.
- Angel Investors: Wealthy individuals willing to take early bets on promising concepts.
- Venture Capital: High-growth companies with large market potential may attract venture capital funding.
- Equity Crowdfunding: Platforms now allow everyday investors to participate under Reg CF or Reg A+.
Increasingly, startups also use convertible notes or SAFEs (Simple Agreements for Future Equity), which allow investors to contribute early without immediately setting a company valuation.
As Chodes notes, personal guarantees are often unavoidable. Lenders and investors want entrepreneurs to have ‘skin in the game.’ Founders can sometimes negotiate caps or limit guarantees to specific assets, but they should always assume some personal exposure.
Building Your Team
No entrepreneur can do it alone and so the question becomes how to build the right team.
“Hiring is not just about filling seats; it’s about deciding whether you need expertise, contributors, or simply bandwidth,” observes Londin. “Sometimes the answer is to outsource; other times, you need someone in-house who owns the problem.”
Key considerations include:
- Hire vs. Outsource: Outsourcing bookkeeping, HR, or IT can save money early on. But for customer-facing roles or core technology, in-house hires are usually better.
- Advisory Board/Board of Directors: Industry experts, investors, and mentors can open doors and add credibility.
- Compensation Mix: Cash is king, but equity can bridge the gap if structured wisely.
López-Kurtz stresses the importance of alignment: “The wrong co-founder or first hire can sink you faster than lack of funding. You need to think not just about skills, but about trust, alignment, and shared vision.”
Founder disputes are a leading cause of startup failure. That’s why clear agreements on equity splits, roles, and decision-making authority should be put in place early.
Legal ‘Must-Haves’
Neglecting contracts and compliance can be fatal to a fledgling business.
Key contracts to prioritize include:
- Employment and independent contractor agreements
- Proprietary information and invention assignment agreements
- Non-competes and non-solicitation clauses
- IP ownership agreements
Regulatory compliance also matters. Issues like worker classification (employee vs. contractor), workplace safety, data privacy, and insurance requirements can create costly liabilities. Regulators are narrowing the enforceability of non-compete agreements, meaning businesses need to rethink how they protect trade secrets.
Balancing Lifestyle vs. Growth
Finally, every entrepreneur has to decide what they’re building toward: a lifestyle business or a high-growth venture.
A lifestyle business, like a local coffee shop or boutique marketing firm, may prioritize steady income, manageable hours, and personal satisfaction. High-growth ventures, like a venture-backed fintech startup, often chase market share aggressively, reinvest profits, and plan for exits via acquisition or IPO. Neither path is inherently better. What matters is aligning your business model, financing, and personal goals from day one.
At the end of the day, turning an idea into a business isn’t just about vision; it’s about execution, structure, and foresight.
As Chodes summarizes: “It’s easy to fall in love with your idea. But to build a real business, you need to focus just as much on the boring details as the exciting ones.”
To learn more about this topic view Turning an Idea or Product Into a Business. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about start-ups & entrepreneurship.
This article was originally published here.
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