PREPARING the PROPER ETHICAL and  LEGAL FOUNDATION

Establishing a Strong Ethical Culture for a Firm
The most important thing an organization can do to combat ethical misconduct is to establish a strong ethical culture. There are specific steps that an entrepreneurial organization can take to build a strong ethical culture.

💢 Lead by Example
- Having leaders who intentionally make ethics a part of their daily conversations and decision making.
- Supervisors who emphasize integrity when working with their direct reports.
- Peers who encourage each other to act ethically.

💢 Establish a Code of Conduct
A code of conduct describes the general value system, moral principles, and specific ethical rules that govern a firm. 

💢 Implement an Ethics Training Program
Ethics training programs teach business ethics to help employees deal with ethical dilemmas and improve their overall ethical conduct. The hope is that this training will significantly cut down on employee misconduct and fraud and will increase morale. 

Building an ethical culture motivates employees to behave ethically and responsibly from the inside out, rather than relying strictly on laws that motivate behavior from the outside in.

Dealing Effectively with Legal Issues

👉 Choosing an Attorney for a Firm
For issues dealing with intellectual property protection, it is essential to use an attorney who specializes in this fields, such as a patent attorney when filing a patent application. If you're particularly tight on money and feel as though you can handle portions of the legal process on your own, there are online companies that provide a comprehensive menu of legal services for business owners.

👉 Drafting a Founders' Agreement
A founders' agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founders will have to remain with the firm for their shares to fully vest. Most founders' agreements include a buyback clause, which legally obligates departing founders to sell to the remaining founders their interest in the firm if the remaining founders are interested.

👉 Avoiding Legal Disputes
Legal disputes are the result of misunderstandings, sloppiness, or a simple lack of knowledge of the law. There are several steps entrepreneurs can take to avoid legal disputes :
⤥ Meet All Contractual Obligations : include paying vendors, contractors, and employees as agreed and delivering goods or services as promised.

⤥ Avoid Undercapitalization : many entrepreneurs face a dilemma regarding this issue. Most entrepreneurs have a goal of retaining as much of the equity in their firms as possible, but equity must often be shared with investors to obtain sufficient investment capital to support the firm's growth.

⤥ Get everything in Writing : it is tempting to try to show business partners or employees that they are "trusted" by downplaying the need for a written agreement. Two important writing agreements are a nondisclosure agreement (a promise made by an employee or another party not to disclose a company's trade secrets) and a noncompte agreement prevents an individual from competing against a former employer for a specific period of time.

⤥ Set Standards : govern employees' behavior beyond what can be expressed via a code of conduct.


Obtaining Business Licenses and Permits
Many businesses require licenses and permits to operate. Depending on the nature of the business licenses and permits may be required at the federal, state, and / or local levels.

➽ Federal Licenses and Permits
Seemingly simple businesses sometimes require more licenses and permits than one might think.

➽ State Licenses and Permits
- Business registration requirements
- Sales Tax Permits
- Professional and Occupational Licenses and Permits

➽ Local Licenses and Permits
There are tow categories of licenses and permits that may be needed, the first is a permit to operate a certain type of business, the second category is permits for engaging in certain types of activities. 

Choosing a Form of Business Organization
➳ Sole Proprietorship
A sole proprietorship is a form of business organization involving one person, and the person and the business are essentially the same. The owner maintains complete control over the business and that business losses can be deducted against the owner's personal tax return. If a sole proprietor's business is sued, the owner could theoretically lose all the business's assets along with personal assets. Unlimited liability and difficulty raising investment capital are the primary reasons entrepreneurs typically form corporations or limited liability companies as opposed to sole proprietorship. 

➳ Partnerships
General Partnerships is a form of business organization where two or more people pool their skills, abilities, and resources to run a business. The business isn't dependent on a single person for its survival and success. The profit or loss of a general partnership flows through to the partner's personal tax returns. The disadvantage of a general partnership is that the individual partners are liable for all the partnership's debts and obligations.
Limited Partnerships is a modified form of a general partnership. The limited partners may not exercise any significant control over the organization without jeopardizing their limited liability status.

➳ Corporations
is a separate legal entity organized under the authority of a state.
- C Corporations : is a separate legal entity, that in the eyes of the law, is separate from its owners.
- Subchapter S Corporation : combines the advantages of a partnership and a C corporation

➳ Limited Liability Company
is a form of business organization that is rapidly gaining popularity in the United States. A limited liability company doesn't pay taxes. Profits and losses are passed through to the tax returns of the owners.