You’ve done your market research, created a business plan, perhaps formed a partnership, limited liability company or corporation, and you’re all ready to get to work…almost. Before you open for business, take inventory and make sure you’ve considered all of the legal and technical requirements that will protect your business.
While the specifics differ somewhat depending on the nature of your business, the state, city and county you’re operating in and a few other factors, every new business owner should consider these core issues:
Begin With the Basics
If you haven’t already done so, obtain an EIN from the Internal Revenue Service (if necessary for your type of business), open a dedicated bank account for your business and submit any post-formation paperwork to your state’s Secretary of State. If you plan to do business in a name other than your name or the name of your entity, you will likely need to apply for a fictitious business name with your county or state.
Make sure you familiarize yourself with annual compliance requirements, such as annual filings with the Secretary of State and any annual meetings required under your state’s corporate law.
Make a Tax Election
If you’re operating as a sole proprietorship, your tax structure is set. However, if you’ve formed an LLC or a corporation, you have options. As an LLC, if you do nothing, you’ll be taxed as a sole proprietor (or partnership, if you have partners), but you may also opt to be taxed as a corporation. Each has advantages and disadvantages, so you’ll want to research which classification best achieves your goals.
Obtain Licenses and Permits
Depending on the nature and location of your business, a number of licensing and permitting requirements may apply. For example, if you’re opening a hair salon, you may need to be a licensed cosmetologist.
In addition, you may be required to obtain a business license from the city or county and/or a seller’s permit from the state. Before you open your doors, make sure that you have complete information about the requirements relating to your profession and to the area in which your business will be operating.
Carefully Consider Location
When you’re deciding where to house your business, there’s more to consider than cost and convenience. You’ll have to ensure that the space you’re renting or purchasing is zoned for the type of business you’re operating.
Even those starting up home-based businesses must research this type of restriction. If you want to teach music lessons or start a yoga studio in your home, you may find that everyone from the local zoning board to your Homeowners Association has something to say about whether and how you can do so.
Shop for Insurance
In some industries, specific types of insurance are required. However, you can’t afford to assume that you’re protected simply because you have purchased the mandatory minimum coverage. Assess potential liability and obtain sufficient insurance coverage to protect your assets in the event of a natural disaster, unanticipated event or a lawsuit.
Advertising and Lead Generation
Of course, you will want others to know about your business. But you must be familiar with many laws affecting the way you advertise.
For example, if you intend to email customers or potential customers, be aware of the CAN-SPAM Act. If you intend to call or text your customers or potential customers, you must be aware of the Telephone Consumer Protection Act, Do-Not-Call provisions and potentially other state and federal laws governing telemarketing.
As your business grows, you will likely need supplies or services from others and you should carefully consider any vendor agreement that your business enters into. Make sure that it accurately reflects the business terms that you agreed upon and that it doesn’t unfairly burden your business or require that your business take on a disproportionate share of liability.
Ensure that you properly name your business as the contracting entity, rather than yourself, so that you don’t inadvertently incur personal liability. Don’t be afraid to ask questions or negotiate appropriate terms.
When the time comes to hire employees, make sure you have a solid understanding of federal, state and local employment law. These laws are numerous and can vary city by city. It is critical that you provide and receive all new hire paperwork required by law and that you pay your employees in accordance with all applicable wage and hour laws.
Forming your business is only the tip of the iceberg. The sheer number of issues to be considered and different governing bodies involved can be overwhelming to a brand new business owner. However, tackling these issues early should result in a solid foundation for future growth and success.
This article is for informational purposes only and is not and does not provide legal advice or opinion, nor does it create an attorney-client relationship between the author and the reader.