There are a lot of things to think about when starting a new business. One of the most important is making sure that your business complies with federal, state and local laws. These are eight of the legal issues new business owners face.
As a business owner, you will enter into a lot of contracts. Any time you purchase or lease a new facility, sign a service contract with a vendor or hire a new employee, a contract will be involved. Because violating the terms of a contract can have serious consequences, it is a good idea to review the terms of any contracts you use with an attorney. You can also use contract assistant software to automate the process and help you keep track of compliance issues.
2. Business Structure
All business owners must choose a legal structure for their business. Some choose to operate as sole proprietorships, but many find it beneficial to form a limited liability company or corporation instead. There are several federal, state and local regulations that affect this process. It is wise to either consult an attorney or use a formation service to ensure legal compliance.
3. Business Name Registration
In addition to choosing a legal structure, you need to register your business’s name. You can’t register a name that someone else has already registered, so before you start promoting your brand, it is important to make sure the name you want hasn’t already been taken. Registering your business name helps protect your business and ensures you comply with state, federal and local laws.
4. Employer Identification Number
You need an EIN to be able to legally hire employees, apply for business licenses, pay federal taxes, operate as a corporation, use a tax-deferred pension plan or open a bank account. You can apply for an EIN on the IRS website. In some states, you will also need a state tax ID number.
5. Business Licenses and Permits
Most businesses need some type of license or permit to operate. Depending on what type of business you are operating you may need one or more licenses or permits at the state, federal and local levels. If you aren’t sure which you might need, the Small Business Administration is a good resource. You may also want to consult with an attorney in your area.
Insurance is a good thing to have to protect your investments, but in some cases, it may also be a legal requirement. If you have employees you may need unemployment, disability and workers compensation insurance. You may also need certain types of liability insurance.
7. Business Bank Account
One of the most important things you can do to keep your business legally compliant is to be diligent about keeping your business and personal assets separate. Part of that is establishing a bank account for your business, instead of using your personal account. You need your employer identification number, or social security number, the formation documents for your business, any ownership agreement documents and your business license to open an account.
There are two issues to be aware of with trademarks. You want to make sure you are protecting your own intellectual property by enforcing your business’s trademarks. Not defending your trademarks can result in losing the right to prevent other people from using them. You also need to make sure you aren’t violating anyone else’s trademarks. A surprising number of words, phrases and images have been trademarked by someone, so any time you are introducing a new product, marketing campaign, creating a website or other project, it is a good idea to research anything that could be a trademark violation and be sure to respond to any infringement allegations from other parties.
You don’t want to derail the launch of your business by starting in legal hot water. Addressing these eight issues will help you get started on the right foot.