Within a few months, the sisters had launched GidgetGear, their own private label of surf wear and accessories based in Whittier, CA. Although GidgetGear wasn't offered in stores, the girls racked up local sales by enlisting their friends as sales representatives, and soon expanded the company to include more than 70 products. "Things were really taking off," Sharlene recalls. "We even planned to launch a second line — Moondoggie Duds."

Trouble Begins
That's when Sharlene and Desi received a letter from an attorney notifying them that GidgetGear was violating another company's trademark on the name Gidget. "We had filed for a trademark on GidgetGear several months before that, so we figured everything was fine," Sharlene explains.

Although the sisters were aware that the name Gidget had already been registered, they thought GidgetGear was different enough to stand on its own. "We honestly didn't know it would be a violation," Sharlene states.

"We had already invested a lot of money in our business, and we couldn't afford to fight the trademark challenge," Sharlene continues. Instead, they tried to strike a deal with the owner of the trademark. "We went back and forth for months, trying to come up with a licensing agreement," Sharlene recalls. "Just when we thought we had a deal, he changed his mind."

The Tough Side of Business
"We were given a date by which our business must 'cease and desist,'" Sharlene says. (Cease and desist is alegal notice ordering a business to stop producing and selling its products.) "In the meantime, we had $15,000 worth of merchandise to get rid of, just to pay back the start-up money our parents had loaned us."

Though the sisters were able to sell some of their merchandise before the deadline, there was a lot left. Since they couldn't sell it, they did the next best thing — the gave it away. "We donated our entire leftover inventory to a home for abused children," Sharlene says. "It was hard to see it go, but it went to people who really needed it." Sharlene and Desi were also able to use the donation as a tax deduction, which helped decrease their losses.

Moving On
Despite their bad experience, Sharlene, now 20, and Desi, 19, have proven they are resilient — and that this is not the end of the story. "GidgetGear was a great stepping-stone," Sharlene says. "We definitely love clothing, so I don't see that we'll be out of this business forever."

If there's anything that the sisters have taken away from this situation, it's the importance of laying the right groundwork when starting a business. "Now we know how important it is to look at the name you pick for your company," Sharlene says. "If it's similar to anything that's already out there, you need to work something out with the person who owns the name, or pick another name."

Starting on the Right Foot
Determined to get his business off to the right start, Daniel Anstandig launched his business with attorneys at his side. Since forming Radio DAER, an Internet radio station (www.internetradiodaer.com), in May 1998, the 18-year-old broadcasting whiz from Beachwood, OH has planned the legal structure of his business forever."

"I have had to deal with tons of legal issues," Daniel says. "They and taxes are my least favorite parts of life. I would rather eat Brussels sprouts and watch paint dry in Iceland without a coat on than spend a day dealing with legal issues. However, they are a necessary evil, especially if you're getting ready to compete in the corporate world."

Daniel's business has grown tremendously since the early days when he broadcast a call-in show and did play-by-play of local high school games. With 1.2 million listeners every month, Daniel is now indeed competing in the corporate world. "I've never filed a legal paper without an attorney," he says. "If you're serious about your business, you have to create a foundation for long-term success. That means getting legal advice from the beginning."

Paying the Price
That advice, of course, doesn't come without a price tag. Faced with that obstacle, Daniel combed through the business contacts he had made. "I did a lot of networking and drank a lot of Pepsi on the rocks at cocktail parties," Daniel recalls. His legwork paid off when he found an attorney who donated his services.

Daniel also solicited help from other contacts he had made — five of whom now serve on his board of directors. "I met people who had backgrounds in management, entertainment, and personnel," Daniel says. With their input, Daniel decided to structure his business as a limited liability company (LLC).

Minding the Law
As part of the music industry, Daniel must also concern himself with copyrights. "In the entertainment business, you are dealing with intellectual property," he explains. To make sure he was on the right path, Daniel worked with an attorney who specializes in trademarks, copyrights, and patents.

"In this situation, I was actually blessed with the age card," Daniel reflects. "If I had started this business at age 30, I don't think I would have been able to rally this kind of support."

Doing Business Under 18
Being young and in business has its advantages — but it also has its disadvantages. That's something David Liu, 16, and his partners, Wei-Cheng Hsu, 17, and Wenzhe Gao, 18, learned when they tried to set up a bank account for their Web site design company, Ink21 Design Studios, based in San Ramon Valley, CA. At the time, all three teenagers were under 18. "Every bank we tried to open an account at required that one of us be 18," David explains.

David, Wei-Cheng, and Wenzhe decided to turn to their mentor, Joe Donahue, a member of the San Ramon Valley Rotary Club. The tree young men had met Donahue after winning the Rotary Club's 2000 Business Achievement Contest. "I helped them register their business with the county," Donahue explains. "Once they were registered, they were able to open a bank account."

Key Referrals
Donahue's established relationship with the bank worked to their advantage as well. It is not uncommon for banks to require one or two years of income statements or tax returns for a business before they will open a business checking account. This requirement can often be waived if the business is "vouched for" by an established customer of the bank.

Donahue was also able to point the business partners in the right direction when it came to taxes and legal structure, introducing them to a certified public accountant (CPA) and an attorney who agreed to donate their services. The attorney helped set up a partnership agreement for Ink21, while the CPA advised them on the best tax strategies. "They provided us with options and lots of suggestions," David says.

A Solid Partnership
David, Wei-Cheng, and Wenzhe, all high school seniors, plan to keep their business going while attending college. Right now, they meet daily to discuss the business, but it probably won't be as easy to do that next year — which is where their partnership agreement comes in.

They believe their written agreement will help the company continue to run smoothly, in spite of any conflicts that may arise. "Our partnership agreement defines the organization of our company and how it will be run," David explains. "Because we want to continue this business, it was important to us to start with a solid foundation."