When you decide to start a business, you should make sure you comply with the legal requirements of running a successful venture. There are several legal considerations for new startups like employment laws, financial regulations, and tax obligations. Your company should comply with the legal responsibilities to avoid penalties. We have compiled this comprehensive checklist to explain the legal requirements you should know for starting a business.
Choose a Business Name
Choosing your company name is one of the most important steps you should make when you start a business. The name you choose must be unique and needs to resonate with your brand. Check if the name is not registered already so that you don’t violate copyright laws. If you want to form a private limited company, make sure the name ends with Limited or Ltd.
Consider the Structure of Your Business
Every business must have a structure unless it is a sole proprietorship where it is owned by one person. There are different types of company structures you can consider like Limited Liability Company (LLC), partnership, or corporation. LLC is the most popular structure and it is designed to protect you from personal liability. It is vital to learn how to set up a limited company to safeguard your assets like your vehicle and home. If your business is sued or declares bankruptcy, your assets will not be affected.
You are also legally required to outline the ownership of the company. In some cases, ownership is determined by the number of shares one controls in a business. Shares can be owned by corporate bodies and individuals. Investors can also have shares in the company. The other thing is that shares are transferrable, and they determine the growth of your business.
Register Your Business
Once you have decided on the structure of your business, you should register it. The registration process should include the entity name, a trademark, and domain name. You also need to provide the physical address of your company. If you use a home address, remember the information is publicly available where companies are registered. It is essential to consult professionals to help you handle the registration process for your business.
Apply for Tax ID Number
Once your business is registered, it must have a federal tax identification number also called Employer Identification Number (EIN). This number allows you to pay federal taxes, legally hire employees, open a bank account, and apply for business licenses. Every business must pay taxes, so compliance with regulations is vital.
Get Business Permits and Licences
You will need to apply for relevant permits and licenses at the federal and government level. The type of license you can get for your business depends on industry, business location as well as federal or state regulations. You need to do your research to gain insight into the permits or licenses you can get for your business. You should know the requirements at local and state levels depending on the nature of your business.
Get Appropriate Business Insurance
One thing you should know when you operate a business is that anything can happen, and different incidents can lead to losses.
For instance, liability cases can lead to lawsuits, and this can affect your business in many ways; read more here.
Therefore, you must buy the right insurance policy for your business. With a policy, you can get peace of mind.
Business insurance options you can consider include a general liability policy designed to protect your business from financial loss. It protects you from lawsuits, medical issues, property damage, or work-related injuries. Product liability insurance protects you if you accidentally sell defective products. Commercial property insurance is designed to protect your business from losses that may arise from accidents, natural disasters, or vandalism.
Open a Business Account
Once you obtain all the legal documents that allow you to start operating your business, you must open a company bank account. From a legal perspective, this will help separate your money and business finances. Choose a suitable and provide your business license, ownership agreement, formation documents, and EIN to the bank. If you want to apply for a business loan, you can only do it through the bank.
When you decide to open a business, you should know the legal requirements you should fulfill first. Every business must have a structure, name, and should get registration. To operate legally, your company must obtain relevant licenses and permits, and it should have a tax number. Make sure you protect your business with insurance. If you don’t understand something, never hesitate to seek assistance from professionals.
