To start your business on the right side of the law take these recommended legal steps first.
Many beginning entrepreneurs are so busy and focused on key business launch aspects such as designing a logo (we recommend 99designs for great logo design), building a website, and meeting prospective customers that they often forget these crucial legal matters.
Don’t be one of those business owners who find out why these legal steps are necessary by ignoring them and getting into big legal trouble later.
Certainly, these are amongst the least interesting and exciting actions you will take for your startup. However, they are amongst the most important. You must launch your business legally correct. These vital actions protect both you personally and your company from future liability and governmental noncompliance penalties and fees.
Here’s a list of the top actions you need to take for your small startup business.
We highly recommend working with a professional legal company such as LegalZoom guide you through this often complex and lengthy process.
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Conduct a Trademark Name Search
You’ve worked hard and thought long and came up with a great name for your business. But have you had that name trademark search to be sure that it is available and to be sure that another company is not already in business under that name?
Don’t take the lazy approach by just Googling the name and if you don’t find it assuming that it is available. Many companies have done just this, and after printing business cards, having signs made and a website discover, by legal action from the other company from the same name, that they must change their name and redo all of their marketing materials at high expense.
Instead, sign up for trademark search and be sure of your chosen company name availability.
Get Trademark Protection
Intellectual property law is complicated. If you do a trademark name search as described above and your name is available, then you begin to use it, you receive what is referred to as common-law owner rights. This does not require additional registration.
However, this protection is not complete, nor does obtaining a DBA in your particular state give you full protection either. To claim “first use”, a term in intellectual property law, your company name needs to be ‘trademarkable’ and be in use in your business. The determination of the ability of your name to be trademarked will be determined by your legal professionals such as those at our recommended legal services firm for entrepreneurs LegalZoom.
We highly recommend that before you spend a lot of time and money building your brand that you get the proper legal protection that a trademark registration gives.
Get a DBA (Doing Business As)
Your company brand-name and your DBA (doing business as) names will be different. Names of corporations, and limited liability companies, and sole proprietorships are legal entities that your bank will require your DBA certificate. Here’s an example, your DBA name could be Main 457, while your brand name is Beauty Bar.
Business Formation – Incorporate or LLC (Limited Liability Company)
By forming either an LLC or Corporation, subchapter S or C-corp, you are both protecting your assets including your family home and your kid’s college fund; you are also protecting your company from excessive taxes and lawsuit judgments causing business dissolution.
Each type of business structure has both advantages and disadvantages. Your particular situation will dictate which is best for you. We recommend that you contact the professionals at LegalZoom to have your exact situation and business start-up reviewed and received their expert guidance on the right business structure for your firm.
These are the most common business structure options in America:
- LLC, limited liability companies which work well for small businesses that want protection legally but little formal structure
- S-Corp Corporations for small businesses to reduce taxes and liability simultaneously
- C-Corp corporations for those entrepreneurs seeking venture capital funding or who plan to go public in the future.
NOTE: Take caution to avoid the erroneous advice to incorporate in the states of Delaware and Nevada because if your company has four or fewer shareholders, you will be better served to form your LLC in the state that you headquarter your business and presumably reside.
Get Federal Tax ID Number – EIN
To make your business legal entities separate from your personal records you need to get a tax number from the federal government also called an employer identification number or EIN. This number is issued by the IRS Internal Revenue Service. It acts like your businesses Social Security number does for yourself. With this ID number, the IRS will be able to monitor your business’s transactions.
If you decided against forming either an LLC or Corporation your business entity defaults to that of a sole proprietor. As such you are not regulated to obtain this tax identification number. However, experts recommend that you do get this number and use it instead of your’s personal Social Security number for all company business.
Get Familiar with Employee Law
As soon as you higher your very first employee you now responsible for obeying a set of regulations referred to as employment law. These include federal and state taxes, both payroll and withholding, self-employment taxes, unemployment insurance, adherence to anti-discrimination laws, compliance with OSHA regulations and workers compensation rules of the hour and wage mandates.
Obtain Needed Permits and Licenses for Business
Dependent upon the type of business and state and city you choose to launch your new company you may be required to obtain individual licenses and permits from government officials at the state, city and sometimes federal levels. These licenses include business operation license, permit for land use and zoning, sales tax license, permits from the health department, and professional licenses.
Open a Business Bank Account
The cardinal rule for all business people whether you are a solo entrepreneur with no employees or a small firm with a few employees you must have a separate bank account from your personal accounts for all business transactions.
Here are the details on how to open a business bank account
In addition to making the IRS happy by separating personal and business accounts, you are also building credit for your new firm which will help you when you apply for business loans.
In the whirlwind of activities to launch your firm take time to perform these actions to protect you and your new company legally. They are many pitfalls on the road to success and you don’t want to fall into any of them. These legal steps will guide your business toward future success.
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.