Starting a business requires creative work, planning, and compliance with legal requirements. These include tax obligations, registrations, permits, and insurance. To help you navigate these requirements, here are ten essential legal steps to take when starting a new business.
1. Choose your business structure: This refers to how your company is legally organized and affects various aspects such as operations, taxes, fundraising, and liabilities. Common structures include sole proprietorship, partnership, corporation, LLC, and nonprofit.
2. Register your business name: Select a unique name for your brand and register it to certify and protect it. You may also consider filing a fictitious name ("doing business as") statement if you prefer to operate under a different name.
3. Apply for state and federal tax identification numbers: Obtain employer identification numbers (EIN) to legally hire employees, pay taxes, apply for licenses and permits, and open a business bank account.
4. Create a business partnership agreement: Regardless of whether you have an official partnership, it’s advisable to draft an agreement to define rights and responsibilities, thereby avoiding disputes.
5. Obtain business licenses and permits: Research the specific permits and licenses required for your location, industry, and business activities to ensure compliance with government rules.
6. Apply for trademarks, patents, and copyrights: Consider protecting your intellectual property (IP) from being copied by others by obtaining patents, trademarks, copyrights, trade secrets, industrial designs, or geographical indications.
7. Understand your tax obligations: Familiarize yourself with local, state, and federal taxes that apply to your business. Seek professional guidance from an accountant or the IRS to ensure correct filings and timely payments.
8. Select the right employee classifications: Learn about different employee classifications, such as full-time, part-time, temporary, seasonal, independent contractors, interns, exempt, non-exempt, remote or telecommuting employees, and freelancers. This understanding enables compliance with wage laws, benefits, and tax implications.
9. Get business insurance: Though not always legally required, having business insurance protects you from potential damages or lawsuits. General liability, professional liability, workers’ compensation, and commercial property insurance are common types.
10. Consult with legal professionals: If unsure about these legal steps, consider seeking advice from legal professionals to ensure thorough compliance.
By following these steps, you can establish your business legally and then focus on organizing your finances, including mapping out startup costs, opening a business banking account, and implementing accounting processes. For a detailed guide on the full startup process, explore our additional resources.
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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
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