Legal Considerations For Small Business – There are many small business requirements to follow when starting a business. Save yourself the extra stress and use this checklist to track your progress.
Legal requirements and best practices for starting a small business center around licensing and registration, tax liability, human resources (HR), and insurance coverage. By checking the 13 steps in the following list, your business can have better legal protection and a stronger edge against potential competition.
Legal Considerations For Small Business
You may also want to take advantage of common small business legal mistakes, which you can see in our information below:
Your Legal Guide To Setting Up A Small Business
Mandatory licensing or registration requirements are there to help your business thrive wherever it operates. Each state handles small business formation differently, and requirements may change if you plan to do business across state lines.
Establishing your business legally, agreeing with your business partners, obtaining a license to operate, and protecting your name, slogan, and other assets are all prerequisites for starting a successful company. Read on to explore each of these steps in more detail.
If your small business is the result of a contract with another party, it is important to properly document the rights and obligations of each owner. A founders’ agreement clearly defines the breakdown of obligations and liabilities between business partners. This is one of the most important legal documents for startups that can protect you and your company in the event of a dispute.
There are four types of businesses you can operate when you formally form your organization: a sole proprietorship, a partnership, an S corporation, or a limited liability company (LLC). Each offers a different structure and unique protections to you as a business owner.
Business Entity Comparison
LLCs and S corporations offer greater personal liability protection, which can save you time and money as an owner. On the other hand, if you have multiple owners, starting a partnership may be easier than setting up another entity, depending on the arrangement.
Except for a sole proprietorship that allows you to operate under your own legal name, every business entity needs its own name to file with the state. Once you’ve decided your business name exists, register it and make it official:
These two terms go hand in hand when announcing your business name to the world, but they do not provide the same protection. In fact, DBA doesn’t protect anything – it’s just a name.
In addition to protecting your business name, trademarks can protect the intellectual property that marks your business. You can trademark slogans, slogans, logos, and any other names associated with your business.
Legal Considerations For E Commerce Businesses
The US Patent and Trademark Office (USPTO) handles trademark applications at the federal level. The cost to trademark your business name averages around $300 and depends on your state.
After you obtain your DBA and register your business, you will need to maintain operating permits and licenses if you do business with a federal agency or if your business is in an industry with heavy federal oversight.
The Small Business Administration provides industry-specific contact information for federal business permits as well as state permit inquiries. If you have questions about your state’s laws, a professional can help resolve your business questions.
Determine your own schedule if you plan to issue shares, and comply with tax laws by applying for appropriate employer status. Take these steps to maximize your finances and prepare for your taxes.
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Record your business finances separately. This not only ensures that you keep your records properly but also minimizes your personal liability in the event of an audit. To open a business bank account, you’ll need an EIN and basic documents proving your ownership.
Although it is possible to run your business without hiring an employee, if and when you hire someone, you will need to pay them. In order to pay your employees, you need to obtain an Employer Identification Number (EIN) associated with your business recognized by the Internal Revenue Service (IRS). Keep in mind that you may also need a State Tax Identification Number (TIN) depending on your state.
Even if you don’t have an employee, you can get an EIN. EINs act like Social Security numbers for your business so you don’t have to submit them on your official documents. This small step can protect your business from identity theft and protect your information from view.
If your small business is classified as a company and issues shares, you can protect its value through a schedule of early investors. A specific schedule determines:
Legal Considerations Before Starting A Business
This approach ensures the interests of your investors that control and ownership remain solely with those actively involved in the running business. Many investors demand their own schedule before committing, so don’t overlook this preventative measure.
Without proper security, your fledgling small business is vulnerable to legal challenges and intellectual property theft. Business insurance and proper monitoring of the employment process protect against liability, although in different ways.
Businesses protect their owners from personal liability but leave themselves vulnerable to legal challenges. Protect your business with adequate insurance to reduce business liability. Some types of insurance are mandatory, while others are optional in some states. Here are some popular types of business insurance:
There are many other types of commercial insurance that can protect your investment against certain risks, such as earthquakes, floods and data breaches. Consider all the risks you face before signing up for a particular type of insurance.
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Hiring your first employee is an exciting step that signals growth. This is also a step that requires high attention to detail. By conducting background checks and verifying employment eligibility, you will assure employers that your employment is legitimate.
Many states have at-will employment laws governing the termination of employees. In some states, it’s very difficult to fire an unqualified employee, so do your homework before hiring someone you’re not sure is the right fit for the job.
As an employer, you must register with the US Department of Labor. Compliance with labor laws is important to protect your responsibilities and ensure the safety of your employees. Requirements include:
Employment law posters and employee handbooks are effective ways to empower your employees to know their rights. Similarly, a labor compliance checklist enables you to anticipate potential problems that could lead to labor disputes or layoffs.
Legal Issues Small Businesses Face In Nigeria
When you start a business, government agencies need records detailing your operations and profits. The law requires you to keep accurate accounting records for your industry, so if you have any questions about proper business reporting, consult a professional for proper advice.
You should not take any steps that you are not sure about. Legal advice and business advice can help guide you through the process of doing business so that all your personal needs and legal requirements are met.
To prepare yourself for the start and check the non-linear functions, you can download the integration checklist below to find any rules you may have missed. Use each step to think about your industry, your location, your employees, and anything else that may determine regulations that affect your business.
Once you’ve met the legal requirements for setting up a business, you’re ready to get started. Running your business smoothly is not a single task, whether you are forming a sole proprietorship or a member LLC. Remember that preparation is your greatest asset – the more prepared you are from the start, the more likely your small business will succeed.
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This article is for informational purposes. This content is not legal advice, it is the opinion of the author and has not been evaluated for accuracy or changes in the law.
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The Step By Step Guide For Starting And Running A Small Business: Green, Trent: 9798986865713: Amazon.com: Books
By understanding legal considerations for small businesses, you can protect your business, comply with laws and regulations, and ensure its long-term success. If you are unsure about the legal aspects of your small business, it is always a good idea to seek the advice of a qualified attorney or accountant.
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Shweta Jhajharia Shweta Jhajharia is the creator of Building Business Value and Unique Model 6M. Shweta