There is nothing more fulfilling than launching your small business for the first time. But before taking the plunge, there are plenty of things to consider. These include your business funding and capital outlay, property construction or rental, material acquisition and supplier connection, employee hiring, and marketing.
However, a crucial part of the overall equation is complying with the legal requirements for starting a business. This is to avoid legal ramifications and ensure the legitimacy of your business. It’s best to ask your local authority what the legal requirements are or seek legal advice from a professional small business attorney.
That said, here are legal requirements to consider when launching a small business:
1. Business Structure
The first legal matter to consider is your business structure. Know that your choice will affect your business operations and tax obligations. For your reference, here are the four organizational structures in business:
- Sole proprietorship: It is the simplest and the most common business structure. There’s a sole owner who has control over the business operations.
- Partnership: As the name implies, two or more people join together to form a partnership in running a business. These partners have equal responsibilities and shares in the business profit.
- Limited Liability Company (LLC): It’s regarded as a hybrid business structure, as it can either be a partnership or corporation. Either the LLC members pay their taxes as self-employed, or the LLC itself gets taxed as a corporation.
- Corporation: It’s the most complex organizational structure in business. The owners’ business shares and obligations depend on their investments in the company. Generally, a corporation has shareholders consisting of directors, officers, and owners.
For the most part, you’ll opt for either a sole proprietorship or partnership when starting a small business. These organizational structures are more appropriate for a startup.
2. Employer Identification Number
When launching a small business, consider obtaining an Employer Identification Number (EIN) to ensure your business legitimacy. It’s a federal tax number that represents your entity or helps others identify your business.
For the most part, you need an EIN if you hire employees or register your business as an LLC. If not, you need to use your Social Security Number (SSN) to identify your business. Hence, it’s best to secure an EIN to protect your SSN.
3. Business Registration
When it comes to the registration of your business name, here are a few legal considerations to make:
- Entity names: After identifying your organizational structure, choose a business name and register it with your state. The state will ensure that there’s no other business with a name same as yours.
- Trademarks: They refer to words, phrases, symbols, and elements that identify your business and your products or services. These identifiers are what separate you from other companies. Hence, apply for these via the US Patent and Trademark Office to protect your business.
- DBA: DBA stands for “doing business as.” It’s an assumed name your business uses, apart from your official legal name. Consider registering for a DBA if you have other trade names used for your business.
4. Business Permits and Licenses
When launching a small business, you must secure business permits and obtain licenses to operate. Know the legal requirements on the federal, state, and local levels.
For federal requirements, consider your business operations falling under federally-regulated areas. A few examples are public spaces, transportation, and natural resources. For state or local requirements, ask your local authorities. Typically, businesses need a permit to set up a brick-and-mortar store. As such, work with an attorney to help you comply with the legal requirements.
Most law firms such as the Law Office of Tony Swartz, mainly focusing on criminal defense for civil cases, also handle small business enterprises. Hence, get in touch with the legal office to see if they can help you with legal matters like securing business permits and licenses.
5. State and Local Taxes
Taxes are part and parcel of life. It’s especially true for running or operating businesses. That’s why you need to secure an EIN as your federal tax identification number when launching a small business. As an entrepreneur, you have tax obligations to keep up yearly. Know that you have state and local taxes to pay regularly.
As much as possible, you have to prepare your tax records all year round. And come the tax season, you have to file your business taxes. Hence, it’s best to work with a tax specialist who can help you stay on top of your tax obligations.
At this point, you now know what legal matters to consider for launching a small business. Be sure to comply with the legal requirements outlined above, from the business structure to the permits and licenses to state and local taxes.
That said, work with a small business lawyer who can guide you in dealing with the legal concerns required for starting a business. By doing so, you’ll ensure the legitimacy of your business, set it on the right footing, and look forward to its growth and success.