Entrepreneurship may be the answer to employment woes for people with disabilities.

Finding employment is very challenging for people with disabilities across the United States. Most disabled adults will be unemployed or underemployed for a good part of their adult life. Some families and disabled individuals have gotten creative and have decided to solve this issue of employment by becoming entrepreneurs. They have started small businesses like making baked goods, pet sitting and grooming, or even selling their artwork and other products online and at shows.

However, what starts out as an opportunity for someone to be productive with his or her day and perhaps earn a bit of money, too, is actually fraught with potential legal pitfalls. Here are the five legal issues to consider when starting a business with a special-needs individual.

Formation

What form of entity should the business be? Most will choose a Limited Liability Company (LLC) or a sole proprietorship. These are the easiest to form and can usually be accomplished online and without an attorney. LLC’s do offer some liability protection and may be a good choice when selling items that may have consumer concerns such as food or pet care. Sole proprietorship in most cities and towns just require the business be registered with them. There are also S-Corporations, which are easy to use for tax purposes and also offer some liability protection.

However, there is an additional consideration with a special needs-operated business. Who will the owner be? Will it be the individual or a family member or some combination of both? Take, for example, the father who sets up a lawn-mowing business with his son. He decides to own the business for his son so that it doesn’t impact with public benefits and because he is concerned about management of customers. This step requires careful counsel to review all the factors.

Funding

Where will the money come from to start the business? Will it be a loan, savings of the individual or investment from outside? There are many factors in deciding how to fund a business, but the first step is to create a business plan that looks at the scale of the business and its cash and equipment needs.

Those starting a cookie business will need to evaluate whether or not they will need a commercial kitchen to make the product. Loans or gifts from families need special consideration regarding how they will be carried on the books.

Employees

Will this company require employees, and, if so, who will manage them? The cookie business may have been started because the disabled individual is a talented baker and has created some fabulous recipes for cookies, but if the business grows, that person may not be skilled at hiring, directing and firing. With employees also comes compliance and additional record-keeping. This issue needs to be well-thought-out in the business plan.

Each product or service comes with the option to restrict growth or use an alternative method for growth. To use the cookie business again as example, the manufacturing, packaging and distribution of the cookies can be outsourced to a co-packer, thereby eliminating the need for employees. Or, perhaps, the company will stay within the family.

Intellectual Property / Equipment Property

If there is a recipe, a trademark or brand, or artwork involved, who will own the property and who will store it? Again, ownership of valuable property or equipment might impact public benefits — although, if the business does well, this may not be an issue for the person with special needs. For example, let’s look at a business of lawn mowing and snow removal. There may be care, maintenance and storage of valuable equipment.

The business plan needs to reflect who is legally responsible for this equipment should there be an accident or waste. This will most likely come up when the owner seeks to insure the equipment and the business. A good solution in this instance may be to have the equipment owned by a family member and leased to the company for use. But the contracts for the lease do need to be in writing and, even if simple, need to spell out each party’s responsibility with maintenance and storage.

Compliance

Even the simplest of business have rules that they need to comply with. And some businesses, such as food preparation and service, have many complex rules that need to be adhered to. With a special-needs individual as owner, the business plan needs to carefully assess responsibility for this compliance.

As we discussed earlier in this article, decisions do need to be made whether to have a special needs owner or a family member owner, and compliance will be a determining factor in making that decision.