Understandably, everyone knows how challenging it can be to start a business, especially when it comes to dealing with all the necessary legal requirements. As a law in most countries, every business owner is expected to cover their legal requirements before opening their dealings to the public.
Fulfilling this part of owning a business will help to avoid lawsuits, fines, or possible prosecution. Now the question is- what exactly are these several legal requirements that every business owner should adhere to? Let’s learn.
- Choose your business entity.
Anyone planning on starting a company should ensure they choose the correct business entity, either for liability or tax purposes. There are several business entities that you can choose from, including LLCs, S-Corporations, Partnerships, and Sole proprietors, so pick one.
- Register your business name
Every business needs to have a name so that the government can track its actions. The name you choose will be registered with your state and then used for operation and filing taxes.
In states like California, it is legal to file a trade or assumed business name, also called a DBA (doing business as), if you operate a corporation, LLC, partnership, or sole proprietor under a different name (different from what is listed on the entity).
Doing this allows you to operate your business under a name that is not yours. Know that a business DBA is different from the business owner’s registered or legal name. Therefore, it would be wise to get in touch with a corporate lawyer, as they would help you understand regulations and compliances. As a law in most countries, hire corporate lawyers every business owner is expected to cover their legal requirements before opening their dealings to the public.
- Get a tax identification number and pay proper business tax
When you own a business, you are legally required to pay tax. These taxes include sales taxes, self-employment taxes, and income taxes.
Most companies usually start as sole proprietors. Therefore, some businesses typically operate using their personal Social Security number for tax purposes. However, business owners should apply for a Taxpayer Identification Number (TIN) for their business by filing for an IRS SS-4.
It would be best to have a tax advisor or an accountant to ensure that you comply with the necessary tax laws. You can also use accounting software to know the firms you need to fill in and when to file taxes.
Additionally, you can opt-in for the IRS pay-as-you-go tax options for your business. To avoid tax penalties, you should regularly check the IRS requirements.
- Get an employer identification number (EIN)
Every business with employees is required to have an employer identification number. It is also essential to operate corporate bank accounts and file business tax returns.
You can obtain employer identification numbers by using the IRS online application found on their website or through the phone. Those restricted from this requirement are single-member LLCs having no staff or sole proprietors.
- Get licensed
Most modern businesses are specialized, and some industries would require the owner to get a license before operating. Therefore, check then to ensure you have the necessary licensing if needed.
Generally, it is not easy to start a business. However, if you are careful about your business’s legal requirements, then you will save yourself from future problems. You should take care of some of the things listed above; nevertheless, you must hire a knowledgeable lawyer to help you to avoid unnecessary issues. Good luck!
Photo credits: coworkinglondon.com