So, you want to open a gym or fitness facility? That’s fantastic news and we are super excited for you. We’ve been there. There are those early stages where you dream big. You can see your gym running on a daily basis. Tons a members are moving around perfectly and everyone is happy. You are making the money you need to survive, maybe more. You don’t have a care in the world.
Then, however, you start to create this dream and you realize there is a lot more involved in getting a business off the ground than you expected. This is especially true for first time business owners. Getting everything together just to open the doors on day one can be a daunting to-do list. More than likely, you are going to miss items and only realize it once there is an issue. One of the most commonly overlooked items when starting a business is the actual legal business formation.
It isn’t enough to simply rent a space, slap a name on it, buy some equipment, and open the doors. If you have not spent time forming the legal entity of your business in the beginning, you could see massive financial ramifications down the road. Therefore, before you worry about finding a space, building it out, and opening the doors, you have to go through the boring stuff: partnerships agreements, operating agreements, business formation, and d/b/a. So, where do you start?
First, are you opening the business as a solo individual? Or, will you have one or more partners? If you are by yourself, then you don’t need to worry about a partnership agreement. However, if you will have one or more partners, then the first thing you need to do is draft and sign a partnership agreement. The partnership agreement will outline the relationship between the partners, the duties for each partner, how the partners will be paid, how a partner joins or leaves the partnership, and more. Think of this as the agreement between all of you to come together to form a business.
Next, regardless of whether you are solo, or with partners, if you are forming a Corporation, you will need an operating agreement. It may seem superfluous to have an operating agreement as a solo owner. However, as you will find with Standard Operating Procedures as you open, having this in writing for reference purposes will be necessary in the future. The operating agreement is the formation of the business. It will outline the business name, description, purpose, corporate structure, and more.
At the same time you are creating the operating agreement, you need to file for the actual legal designation of your business. You may be familiar with these legal designations: LLC, Ltd, Company, Corporation, PLLC, Inc., and more. In most states, you can file as an individual doing business as . . . however, there are some serious legal ramifications to this designation and you really want to talk with an attorney if you are thinking about skipping the formation of a legal business entity. The pros will not outweighs the cons. Make it formal to protect yourself, you money, and your family.
Doing Business As (D/B/A)
Finally, pick a d/b/a. D/b/a is short for “Doing Business As.” This is also known as your business’s fictitious name. Your company may be called My First Gym, LLC. However, you want your physical business to be called “Get Results Gym.” You cannot file your LLC and then just choose any name to use in the operation of your business. You have to formally file your fictitious name with your state so everyone knows that name is associated with your legal business. Think of it as a legal nickname. It isn’t necessary to have a d/b/a, but talk with an attorney about the pros and cons before you make a final decision.
Is This Really Necessary?
The above steps are not an all inclusive list of everything legal you need to do in forming your new business. However, these are the items most often overlooked or forgotten. You may think to yourself, “But, my business is going to be small. I’m not Amazon. Do I really need all this formal legal stuff?” Yes, you do. These formalities are designed to protect you. Let’s assume for a moment that you skipped these steps for some reason. Six months into running your business, someone trips and falls coming in your door and sues you for negligence. If you did not take time to form your legal entity, your personal finances, you personal bank account, your personal possession may now be exposed in the legal action. At the very least, the legal business entity will protect you from legal action.
Do you have follow up questions about forming a business? Reach out. We are always here to help.