Q: Your columns usually deal with legal topics of interest to established, larger agencies, such as negotiating corporate-account contracts, getting the best GDS contracts and acquisitions. What about very small and startup agencies? What legal advice can you offer me in starting my home-based agency?
A: First, you need to decide on a business name that is not the same as, or confusingly similar to, someone else's name in the local or specialty market that you want to enter. Otherwise, any established agency with such a name might sue you for any lost business that it can prove and might even get a court to order you to change your name.
Second, you need to make sure that local zoning laws enable you to operate a travel agency (even a home-based or cyberspace one) in the physical location you want. If not, you might need a special-use permit or zoning variance, which could take months.
Third, you need to decide on a legal structure for your business; i.e., a sole proprietorship, partnership (if you have one or more partners), corporation or limited liability company. There are pros and cons for each type, and you can Google questions such as "proprietorship vs. corporation vs. LLC in (your state)" to help you decide.
For a startup travel agency, I usually, but not always, recommend that you form an LLC. You get the limited-liability advantage of a corporation without having to observe corporate-formality rigmarole such as annual meetings, keeping minutes and issuing stock certificates. By "limited liability," I mean that someone who sues your corporation cannot reach your personal assets unless you have given a personal guaranty.
Fourth, once you decide on the business structure, you need to file the appropriate papers with the appropriate state government agencies. In most states, this means filing articles of organization with the corporate division of your secretary of state. Look for sample forms and fees on your state government's website.
Fifth, right after you file the forms setting up your business structure, you should register the business with the Internal Revenue Service and obtain a federal employer identification number, even if you will have no employees. You should also register with your state taxation and unemployment compensation authorities.
While it is possible to take all these legal steps without the assistance of a lawyer, I recommend that you at least consult a lawyer with experience in business formation. Even if the lawyer does not draft any documents for you, you can make sure that the steps you are taking make sense under the law, and you will have someone to answer your questions.
Sixth, in most cities, counties and towns, you will need a local business license, just like any other retail business. You will need to pay a business-license tax and get a certificate that you must hang on the wall.
Finally, if you have one or more partners, it is absolutely essential that you have a written agreement covering each partner's rights and duties, including what happens if someone wants out.
In my next column, I will cover some steps that are specific to the travel agency business, such as compliance with state seller of travel laws.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email Pestronk at [email protected].