Starting your own business is incredibly exciting. However, it’s also probably not as simple as you expected. Apart from having to be an expert in your industry, you’ll also need to learn about other aspects of running a company. For example, you should be aware of the taxes you have to pay and find out how to structure a business entity. To ensure your business runs smoothly, you should understand basic business legalities.
First off, you’ll need to make a decision regarding the form of ownership. You will be able to choose from the following four options – partnership, sole proprietorship, corporation, and Limited Liability Company (LLC). Each option has its own set of advantages and disadvantages. Your decision needs to be based on what you have planned for your business.
If you choose to structure your business as a partnership, it means that two or more people will share ownership of the company. These people have to set up a legal agreement which will detail how they’ll share profits, resolve disputes, make decisions, buy out partners, and admit someone new to the partnership. On the other hand, structuring your company as a sole proprietorship means that you will own all of its assets. However, it’s worth noting you’ll assume responsibility for any and all of your firm’s debts and liabilities as well.
In order to protect your personal assets from liabilities of the business, you should consider forming a corporation or an LLC. By structuring your company as a corporation you’ll essentially turn it into a distinct entity separate from anyone who is associated with it. Even if you own 100 percent of the corporation, you will not be liable for its debts. This means that if your corporation gets sued, you will not. This is a much better option than being a sole proprietor and assuming responsibility for everything related to your business.
It’s important to note that corporations are governed by a board of directors, who’re elected by the company’s shareholders. The board of directors is tasked with overseeing important decisions. On the other hand, an LLC functions as a mixture of a corporation and partnership. It provides limited personal liability to its owners as well as the tax efficiencies of a partnership. Take your time when deciding on a business structure, as it will have a huge impact on how it is managed and how you’re taxed.
Another crucial step to starting a business is declaring it a separate legal entity, which you can do by obtaining a Federal Tax Identification Number. It is issued by the IRS and is necessary when you’re opening bank account for your business and filing tax reports. Of course, you’ll be able to do this only after you decide how you’ll structure the company.
As a business owner it is your duty to learn everything you can about employee laws before you hire someone to work at your company. Although you can research this on your own, it’s best to go through them with an employment law professional. Some of the things you’ll need to learn more about include OSHA regulations, workers’ compensation rules, anti-discrimination laws, and unemployment insurance. No matter which state you’re operating in, you should enlist a representative to help you with the legal matters.
You will need certain business licenses and permits when you start your company. Depending on the type of permit or license, it can be issued from your local, state or federal level. Note that even if you’re working from home, you’ll still need a special zoning permit. It will be easier for you to handle all of this with the help from an attorney.
Finally, you should make sure that you’re legally permitted to use your company’s name. Of course, you should do this before you start printing business cards and coming up with marketing campaigns. You can check whether you can use a certain name by doing an online search of the business names registered in your state.