1. Business Structure
2. Tax Identification Number
3. Business Licenses
4. Agriculture
5. Alcoholic Beverages
6. Aviation
7. Environment
8. Choosing a Business Name
9. Insurance

Being conversant with small business legal requirements is an essential skill for entrepreneurs. Before starting a business, make sure to acquaint yourself with federal and state requirements. These requirements were instituted to enable businesses to function properly.

Business Structure

Before commencing businesses activities, you are required by federal law to choose a business structure. Choices include a limited liability company, partnership, corporation, and sole proprietorship. The choice of business structure determines the kind of documentation that must be filed with the IRS as well as the federal taxes the business is required to pay.

For sole proprietorships and partnerships, owners pay their business taxes through their personal income tax return. Although LLCs have the same tax structure as partnerships, owners' personal assets are protected from business liability.

For S corporations, owners also pay their business taxes through their personal income tax return, although they are usually paid a “reasonable compensation.” For C corporations, the taxes are paid by the company. Non-profit organizations are usually exempt from all federal taxes.

The IRS has specific tax forms for each of the business structures listed above. They can be found on the U.S. Small Business Administration or IRS website.

Although sole proprietorships (who don't intend to hire employees) are exempt from this rule, all other business structures are required to obtain EINs.

The IRS uses a business's EIN (Employer Identification Number) to identify it for tax reporting purposes. It determines the parties related to the business as well as the amount of taxes the business owes to the government. It's now possible for businesses to apply for EINs online and get them immediately.

Tax Identification Number

Small businesses are also required to obtain a tax identification number. The IRS issues these numbers once business owners inform them of the type of business structure they want to use. Usually, the EIN is the tax identification number for businesses with employees and can be used to pay employer tax and file tax returns for the business.

However, business owners (especially sole proprietors with no employees) can apply for a tax identification number rather than using their SSN. You can call the IRS to obtain the tax identification number or apply online.

Business Licenses

Although most small businesses do not require a federal license to operate, certain kinds of business must register with a relevant federal government agency.

Agriculture

Businesses involved in the interstate transportation and importation of certain goods must register with and obtain a permit from the U.S. Department of Agriculture. Such goods include:

  • Biotechnology.
  • Plants.
  • Animals.
  • Animal products.
  • Biologics.

Alcoholic Beverages

Businesses that are retailers, wholesalers, manufacturers, and importers of alcohol beverages must register with the ATTB (Alcohol and Tobacco Tax and Trade Bureau). They are required to maintain certain records and pay special taxes.

Aviation

The FAA (Federal Aviation Administration) issues licenses to pilots, aircraft, airports, and businesses that provide medical aviation services.

Environment

Businesses that sell or buy contaminated land will need to go through the Environmental Protection Agency (EPA) to get rid of the contaminants. The agency is tasked with drafting and maintaining environmental regulations at the federal level.

Choosing a Business Name

After determining the best business structure for your business, you need to choose and reserve a unique business name that obeys all the naming conventions and doesn't violate the federally protected trademark of another business.

A name search can be done using internet search engines or through the website of the USPTO (U.S. Patent and Trademark Office).

Insurance

Although entrepreneurs and small business owners are not required by law to obtain a public liability insurance policy, it's a good idea to get one. Such policies are advantageous to businesses that work in the public space or interact with the public because they can help keep the business running in the event of a lawsuit.

You can be exposed to any number of risks while running your business. As such, it's best to obtain adequate insurance. For example, you might consider building insurance if you own the property where your business is located.

If you need help with small business legal requirements, you can post your legal need on the UpCounsel marketplace. UpCounsel accepts only the top 5 percent of attorneys/lawyers on its site. Attorneys on UpCounsel come from prestigious law schools like Yale Law and Harvard Law and usually have 14 years of legal experience, including work on behalf of or with companies like Airbnb, Menlo Ventures, and Google.