By Kelly Bagla, Esq.
With each new year, entrepreneurs look to turn their vision into a business. These startups are often overflowing with tremendous ideas, energy and optimism, but don’t always have a roadmap for the legal aspects involved in starting a business. In the flurry of drumming up new customers, getting ready for a website launch and building the first prototype, it’s all too easy to put off some of the less glamorous, more administrative aspects of running a company.
Company filings and regulations are not the most exciting parts of your startup, yet they are critical to the health of your business and personal finances. Here’s a list of administrative aspects you need to consider for your startup or small business:
PICK A NAME – MAKE SURE YOU ARE LEGALLY PERMITTED TO USE IT
Before you start printing our business cards, make sure the great new name you thought of is not infringing on the rights of an already existing business. Start with a simple google search, conduct a free trademark search and then conduct a search with the Secretary of State.
INCORPORATE YOUR BUSINESS
Forming a corporation is an essential step to protect your personal assets from any liabilities of the company. Each business structure has its own advantages and disadvantages, depending on your specific circumstances.
GET A FEDERAL TAX ID NUMBER
To distinguish your business as a separate legal entity, you will need to obtain a Federal Tax Identification Number, also referred to as an Employer Identification Number (EIN). The EIN is issued by the IRS and acts as a social security number for your business. This number will identify your business with the IRS and your clients.
OPEN A BANK ACCOUNT TO START BUILDING BUSINESS CREDIT
When you rely on your personal credit to fund your business, your personal mortgage, auto loan and personal credit cards all affect your ability to qualify for a business loan. Using business credit separates your personal activities from that of the business. The begin building your business credit, you should open a bank account in the name of your company and the account should show a cash flow capable of taking on a business loan.
LEARN ABOUT EMPLOYEE LAWS
Your legal obligations as an employer begin as soon as you hire your first employee. You should spend time understanding what your obligations are according to the state you conduct business in. You should know federal and state payroll and withholding taxes, self-employment taxes, anti-discrimination laws, unemployment insurance, workers’ compensation rules, and wage and hour requirements.
Obtain the necessary business permits and licenses
Depending on your business type and physical location, you may be required to have one or more business licenses or permits from the state, local or even federal level. Such licenses include, general business operation license, zoning and land use permit, sales tax license, or professional licenses.
FILE FOR TRADEMARK PROTECTION
Using a name instantly gives you common law rights as an owner, even without formal registration. However, trademark law is complex and simply registering your company in your state does not automatically give you common-law rights. In order to claim first use, the name has to be trademarkable and in use in commerce. It’s always a great idea to protect your business name as it can become a valuable asset of your company.
GET YOUR LEGAL DUCTS IN A ROW
No matter how busy things with your startup get, set aside some time to address these matters and take your legal obligations seriously. Getting your legal ducks in a row right from the start will help you avoid any pitfalls down the road, and will help you scale your business successfully as you grow.
I’m the CEO of GoLegalYourself.com where we provide legal tools for savvy entrepreneurs and I’m proud to provide a limited time offer of 40% discount on our Startup Essentials Package. Please use the code Startup40 at checkout.
For more information on how to legally protect your business please pick up a copy of my bestselling book: ‘Go Legal Yourself’ on Amazon or visit my website at www.golegalyourself.com
Disclaimer: This information is made available by Bagla Law Firm, APC for educational purposes only as well as to give you general information and a general understanding of the law, and not to provide specific legal advice. This information should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.