Are you wondering how to legally protect your natural product or food and beverage company?  The legal system can seem overwhelming when creating a new product or launching a brand.  Legal obligations and fees vary depending on business structure and location.  Consult a business attorney and a regulatory compliance expert prior to forming your operations structure to determine which requirements apply.  Use our natural product legal decision checklist to make informed choices and find resources.

1. Choose a business structure

This decision needs to be made first.  Your business structure impacts your business registration, tax obligations and personal asset liability.  So choose carefully.  Future structure changes may be limited by your location and cause tax penalties and other negative consequences.

Also choose a structure that offers the benefits and legal protections that are right for your business.  There are nine business structure choices with various considerations .  The most popular for new businesses are:  sole proprietorship, partnership and Limited Liability Corporation (LLC).

• Sole Proprietorship

Set up the most simple business structure if you’re a company of one (for now).  One person assumes liability for company profits and debts.

• Partnership

Choose this for businesses owned by two or more people.  This structure allows partners to share profits, losses and decisions.

• LLC

Consider this for small businesses seeking legal protection but simple formality.  The LLC structure shields owners from personal liability.

2. Register your company name

You put a lot of time and effort into choosing the perfect name for your business.  Protect it by registering it with the right agencies.  Each name registration is legally independent.

• Entity name

This is how a state recognizes your business.  It also protects your name at the state level.  Name requirements vary, but may include distinguishability (name must be different from other similar names).  For example, if the business name “Healthy Vitamins” is registered you may not choose “The Healthy Vitamins”.   Another common name protection is purpose-related.  For instance if your business is registered as “Henry’s Healthy Hub” then “Henry’s Healthy Properties” would likely be denied registration.  Consult your state’s government website for business name requirements.

• Trademark

Trademarks protect your business name at a federal level.  Visit the U.S. Patent and Trademark Office’s website for trademark searches and registration.  Trademark applications must meet legal requirements prior to registration.  To make this easy, consult an experienced trademark attorney.  Or apply yourself.  For help visit the U.S. Patent and Trademark Office’s step-by-step trademark filing tutorial.

• Domain name

This protects your business website address.  A domain name is the name used for your website, like “www.vitawater.com” or “www.gingergells.com”.  Domain registrars, like GoDaddy or Domain.com, register domains through the Internet Corporation for Assigned Names and Numbers (ICANN).

• Doing Business As (DBA)

Use this when the operating name of your company differs from the legal name.  For instance, if you’re “Joan Doe” conducting business as “Natural Vegan Products” you may need a DBA.  Some states require filing of this name to protect consumers.  So consult your state’s government website for DBA requirements.

3. Obtain an Employer Identification Number (EIN)

Businesses located in the USA or a U.S. territory need to apply for an EIN.  The IRS uses this free service to identify your business for tax purposes.  Don’t fall for scammers charging for this service.

You can easily apply online.  This requires a valid Taxpayer ID (SSN, ITIN, EIN) and the ability complete the application in one session.  You can’t save the application and return to it later so keep this in mind.  Also inactive sessions expire after 15 minutes.  Apply online now.  The system validates the information upon submission and an EIN is issued immediately.

You can also apply by fax, telephone and mail.

4.  Obtain business permits and licenses

Avoid one of the most common mistakes made by new business owners:  failing to obtain necessary permits and licenses. Make sure your business stays open by obtaining the required legal items.

• Business license

Contact your city to obtain a business license.  This grants you the right to do business in your city.  Other permits business permits vary.  Check if you need fire department, air and water pollution control, sign usage, and county permits.  Visit your local government website for more information.

• Sales tax license  

Companies selling taxable goods and services must obtain a sales tax license.  Requirements vary by state so check with yours.

• State licenses, certifications, and occupational permits 

Most states require people working in select professions to meet legal requirements.  So contact your state government office for a list of these professions.

• Federal business license

Some companies, like those selling meat products and fruits and vegetables, require this license.  Consult the SBA’s licenses and permits site for more information.

• Health department permit and FDA registration

Companies holding, distributing, manufacturing and warehousing food to customers or wholesalers need both of these  The Health Department will inspect your facility prior to issuing the permit.  The FDA requires that you register so that in the event of a serious adverse reaction to your product(s), a product recall, etc. your contact information in the system allows for a swift response to protect public health and safety.

5.  Draft legal documents for hiring contract workers

Do you plan to hire contract workers:  individuals providing goods or services to a company who aren’t a company employee?  For consultants, artists, web designers or other contract workers, make sure to obtain legal documents before work begins.  Contractors may be difficult to track down later.

• Nondisclosure / Confidentiality Agreement (NDA)

Protect sensitive company information by requiring contract workers to sign an NDA.  Click here for a sample Natural Product NDA / Confidentiality Agreement you can modify.  Have an attorney review your NDA to ensure validity.

• Proof of qualifications

Keep a copy of the contract worker’s application, resume, and other proof that they quality for your job.  Also make sure contractors realize they are filling out a contract worker application and not an employee application.

Verify their Tax ID and contact references to make sure the worker’s qualifications are valid.  Also, conduct a background check if the contractor is working with sensitive information or providing in-person services to customers.

• W-9 Form  

Independent contractors paid $600 or more per year need this form.  You will need the contractor’s taxpayer identification number, name and address.  The W-9 excuses your company from having to withhold payroll taxes for contract workers.  It also provides the information needed to create a 1099-MISC Form for contractors for the tax year.  The 1099 is the contractor equivalent of the W-2 form that you use for company employees.

• Written contract

Prepare a contract for each contract worker.  This protects your business if a dispute arises.  Make sure a contract includes the scope of the work, who owns the work, payment information, and an independent contractor statement.  Have both parties sign the contract.

Even though it might seem tedious, take the time to meet your legal requirements.  Remember business laws and regulations vary by industry and state.  Understand which requirements apply to your business, and consult an attorney for necessary guidance when needed.  If your company doesn’t have a legal team, don’t skip legal steps.  Type “free legal help” into your browser to find free or inexpensive help.  My browser returned over 2 billion hits on this search term.  Sleep easy at night knowing you and your company are legally protected.

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.

Susan Ulery utilizes her legal background plus 20 years of manufacturing expertise in the dietary supplement industry to help clients overcome regulatory challenges.

Want to understand your supplement ingredients without needing a biomedical engineering degree to decipher the label?  You’re not alone. More consumers are seeking “clean label” products that offer transparent and simple labels. The market research firm Euromonitor estimates clean label global food and supplement sales will rise from $165 billion in 2015 to $180 billion by 2020.  Boost sales by creating clean labels to attract buyers seeking transparency.

What exactly does clean label mean? It’s confusing because no formal agreed-upon definition exists. This stems from consumers desiring a variety of product characteristics: transparency, USDA organic, no artificial ingredients, non-GMO, hormone and antibiotic free, and locally grown.

People increasingly want specific product characteristics for their food and beverages, and they want to ensure products meet their needs or they won’t buy.  Labels information can make or break sales. Make sure your labels are updated to meet the needs of targeted customers so they’ll choose your product.

Target Specific Customer Label Needs

Since there is no government-agency definition of clean label, consumers are just as confused as everyone else as to what this means. Buyers are clear on what they want, though. Discerning consumers seeking clean labels look for organic certification, fresh foods, familiar ingredients and easy to read and understand labels.

Discover your customer’s ideal needs so you can adjust labels to match. The easiest way to discover what people want is to ask.

A Cargill marketing study of 302 U.S. grocery shoppers found almost half would pay more for clean label products for their children.  So if you’re selling supplements for kids, customer feedback may signal a popular desire for an organic-certified version.  Add the organic certificate to your label to attract customers and drive sales.

Besides food consumed by children, Cargill found clean labels most appeal to consumers of functional foods. Marketers of these products can use clean labels to boost sales.

Provide Transparency and Simplicity

We’ve all stood in the grocery store puzzling over a product label bursting with multi-syllable mystery ingredients. People seeking clean foods will put that product down and reach for another item.   These consumers want labels that are easy to read and understand.

This means the label ingredients are familiar and not difficult to pronounce.   Once example of simplifying an ingredient list is to use vitamin B12 in lieu of the vitamin’s scientific name cyanocobalamin. There are 56 names for sugar.  Keep it simple whenever possible.

Natural product companies can reformulate products to meet clean label demand.  Maybe your product can be made with a shorter ingredient list or a more wholesome ingredient.

New formulations can be used as opportunities to create products with simple ingredient lists that appeal to targeted markets. Google natural product trends to find innovative bestsellers. Smart companies can discover new popular ingredient trends and capitalize on buyer needs.

Label Legalities

Make sure claims made on labels have research back up. You don’t want to end up with a supplement labeling class action lawsuit, like Universal Protein Supplements Corporation (which does business as Universal Nutrition, Universal USA and/or Animal Pak) which allegedly violated California law by labeling supplements “Made in USA”.

“Food companies must understand their product, its ingredients and its processing so labeling statements narrowly tailor claims to properly reflect the product,” says David L. TerMolen, partner and member of the food industry team at the Chicago law firm Freeborn & Peters L.L.P.   The Institute for Legal Reform’s The Food Court Paper states food marketing class actions increased from about 20 in 2008 to over 425 active cases in federal courts in 2015 and 2016.  Avoid court by using caution before making label claims.

Customers are paying more attention to product labels as they seek products that meet their individual needs. Although clean labels mean different things to different people, smart companies can use guidelines to target discerning customers.  Why not grab your slice of the projected $180 billion clean label pie?

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.