Starting a business is one of the most challenging things you will ever do. You have to figure out what kind of business to start, how much money you need, and whether or not it’s something that people will want. Before starting any business, one decision has to be made about legal requirements for your specific type of business. This article aims to answer this question by discussing the general legal requirements for all types of businesses.
What Are the Legal Requirements for Starting a Business?
You may have a terrific new business idea, but you’ll be surprised to find out that there are many legal requirements for starting a business.
Select The Locations
When starting any type of business, the first thing to do is to determine if your state has an office dedicated to small businesses. Every state in the United States has one, so it’s best not to start until you’ve contacted yours and taken care of all necessary paperwork. If you fail to comply with these laws, your new company could face closure or other penalties. It can also disqualify future applicants who don’t follow them correctly either. Your local SBA (Small Business Administration) will have more information on how much money is needed, startup procedures, apply for permits and a business license, etc., which vary by and location.
Register Your Business Name
Choosing your company name can be easy or very difficult. You may just want to use your name, but that isn’t the best idea in some cases. For example, if you live in a state with an office for small businesses, they will only allow you to use names on their list of legal business entities. This means if there is another business already named after yourself, it’s best not to do so because it could result in future complications and fees.
Protect Your Company Name
Even though registering a company name should prevent other companies from using the same one like yours, trademarking(TM) is still highly recommended. It protects you against people who try to make money off of selling products under your registered trademarked company name without your permission. You can also use it to prevent other companies from using trademarks that are very similar or even identical to yours.
Form a Corporation or LLC
Now that you’ve chosen the name of your company, you’ll need to form an LLC (Limited Liability Company) or Corporation depending on which type of business entity fits best for your new company. This is usually done through filing paperwork with either state agencies like the Secretary of State’s Office, LegalZoom, etc., but there are some exceptions. For example, if you want to set up an S-Corporation, it must be done by an attorney because only they know how to do so properly. However, if this doesn’t apply in your case and you live in one of the following states, then you can form an LLC or Corporation by simply filing paperwork with your Secretary of State’s Office.
The LLC is the more flexible of the two, but it doesn’t offer as much protection. On the other hand, a corporation provides you with some legal protections against lawsuits and creditors. So before choosing between an LLC or a Corporation, ask yourself what your business entails; if you’re unsure, consult with an experienced lawyer who can advise which one would be best for your new company.
Apply for a Federal Tax ID Number
Now that you’ve chosen and formed your company, it’s time to apply for a Federal Tax ID Number. This is used by the IRS (Internal Revenue Service) when determining the tax liability of taxpayers. It can also be used as an identification number to open bank accounts, file taxes, etc., but only one taxpayer should use this particular number at any given time because multiple ones would confuse both service providers and the federal government.
The first step is applying online on the IRS website; however, if you live outside of America or are an American living overseas, you’ll need to do so through paper filing, which requires additional information like proof of citizenship. Different forms depend on where you currently reside, called Form W-BEN for those inside the U.S., Form W-BEN-E for that outside of America, and a Certificate of Foreign Status form if you’re living overseas without any visa.
Obtain Business Permits and Licenses
To continue business operations, you’ll need to obtain the necessary permits and licenses. Unfortunately, these can vary depending on your state, county/city, as well as industry. For example, if your company deals with food, you would need a permit from city hall (or any other designated agency) to do so legally. This could include obtaining a health department license or paying for monthly inspections like restaurant associations(RAs.)
Protect Your Business with Insurance
Once your business is up and running, it’s always a good idea to protect it with insurance. There are three types of policies that you can invest in: Property Insurance, Liability Insurance, or Package/Business Owners Policy (BOP.)
Property insurance protects against natural disasters such as floods, fires, earthquakes, etc., while liability insures against financial losses caused by lawsuits. A BOP combines both property and liability coverage into one affordable package, making the process much easier for any small business owner; however, if you’re starting, there’s no harm in simply getting separate ones until enough money has been saved up.