Many people dream of starting their own business one day, but success can be hard to achieve in today’s marketplace. Unfortunately, a great many startups flounder early on because they fail to adequately prepare themselves and their company legally, and are too focused on profit and loss. If you don’t take the time to thoroughly research your businesses legal requirements and liabilities, then you could find your business stalled by legal disputes or fail regulatory standards. Here are five legal requirements for starting a small business that you need to fulfill to avoid excessive legal costs and regulatory pitfalls, and operating a successful business.
Apply For A Federal Employer Identification Number
Before you can legally open your business, you need to apply for a federal Employer Identification Number, or tax ID EIN. An EIN is the business equivalent of a Social Security Number for individuals. Once obtained, an EIN allows you to pay federal taxes, apply for business licenses, open business bank accounts or credit cards, and hire employees. At the same time, with your Employer Identification Number obtained, you can use a tax-deferred pension plan and operate as a corporation. Before you can open a legally compliant business, you need to apply for a federal EIN.
Publicize The Formation Of Your Business
Some local governments require certain types of businesses to publicize their formation in local newspapers or business media. This simple step is often missed by eager entrepreneurs, and they are often given a hefty fine, on top of the expense of then making the announcement. This can also be an opportunity to advertise, however, if local regulation allows it as a part of your announcement. It is worth investigating these regulations so you can make the most of the opportunity.
Obtain Protection For Your Business
As the owner of a business, you may find yourself personally liable for debts or legal penalties your business incurs if you don’t get the right protection for yourself and your assets. No one wants to plan for failure, but if the worst happens to your business, you don’t want that to have further financial repercussions in your personal life. Making a business successful takes a lot of time and effort, and even then, businesses can suddenly collapse because of situations or circumstances beyond their control. You can protect your personal assets from your business by forming and LLC. This is one of the most popular business structures on the planet. It is relatively quick and simple to form an LLC, but you should consider enlisting professional help make it even quicker and ensure you follow all the necessary local government regulations.
Purchase Business Insurance
No matter what type of business you operate, you will need some insurance. Certain types of business may need extra insurance to cover increased liabilities such as restaurants and hair salons. The properties your business uses will also need to be insured to comply with local legislation. Plenty of good quality insurance cover is recommended for any business, and can potentially save you millions in claims. Accidents can and do happen, and you will need to be covered in case of an injury to an employee or customer.
Hire An Accountant
Most businesses that fail do so because of financial mismanagement. If you think you can save yourself some money by doing your own accountancy, you may be costing yourself your business. Local and Federal Taxes can often cause a poorly managed business problems, whereas a dedicated accountant can keep all tax information and filing up to date, and can often identify problems before they become too big to solve. A good accountant can also find tax savings and incentives for your business.
Do Not Violate Any Existing Trademarks
You may think that naming your company will be a fun and easy part or starting your business, but it actually causes many people a headache. The name of your business must be unique, and not violate any existing trademarks. You must also own the rights to any artwork or design that is incorporated into any company logo, or have an agreement in place with the copyright owner. Before you start your new business, thoroughly examine your trademark registration process to ensure your offerings are not too similar to existing organizations.
Open A Corporate Bank Account
After you have obtained an EIN, the proper licenses, and insurance protection, you should consider opening a corporate bank account. It is essential for new business owners to have a business bank account before accepting client payments. Look for banks that are locally convenient, offer competitive fees, and provide flexible services. In order to obtain a bank account, you will need to provide documentation of your federal EIN, business formation records, licenses, and agreement contracts. If you are unfamiliar with selecting reputable bank accounts, be sure to first consult a financial planner to effectively outline your options.
Starting a business takes a lot of time, energy and investment. You need to check what legal requirements your business has before you go to market. Hopefully this guide has helped set you on the path to success.