Legal Requirements for Launching Your Business

Can you start a new business without going through legal or regulatory hoops first? In some cases that answer is “yes,” especially if your business is quite limited in scope such as providing dog-walking services on an irregular basis or watching a neighbor’s child after school. Even then, you need to familiarize yourself with local zoning and business laws that might restrict your ability to conduct business from your home.

Millions of Americans have started businesses from their homes, with some going on to build large corporations from very humble beginnings in their garage, den, attic or basement. Before you plan to start a business, talk with a business attorney to ensure that your budding enterprise complies with federal, state and local laws.

Legal Establishment

Balanza de la Justicia

Balanza de la Justicia (Photo credit: Wikipedia)

Your attorney may recommend that you formally and legally establish your business, establishing it to your preferred tax structure as well as to reduce your legal liability. An attorney familiar with tax law can help you here, by going over the various legal structures that your business can take.

As a budding small business operator, you have several choices available to you. If you are the lone business operator, then a sole proprietorship may be right for you. If you will be launching your business with other hands on deck, then a partnership or a corporation may be the way to go. A limited liability company is another option, useful for businesses of any size.

Financial Matters

Although some businesses can get started with little or no money, most businesses require at least some initial capital to get going. If this will be the case for you, then write up a business plan that outlines your business and offers a blueprint of where you want it to be in one, six and 12 months and longer.

You will need a business plan to qualify for business credit. Creditors, including your banker, will examine your business plan as well as your incorporating documents to determine whether you will receive credit or not. Always open your business accounts with an employer identification number, a nine-digit number that you can acquire from the IRS. An EIN helps build business credit and such accounts typically are not attached to your personal credit.

Business Insurance

Even your dog-walking service may need insurance. Insurance should not be considered a penalty, rather it protects you from a potential liability. When walking a customer’s dog, you could be sued if that dog bites someone. Although the owner may be held primarily responsible, your name could be included with the suit.

Before you run out and buy business insurance, contact your homeowner or rental insurance provider to see if you are covered. If not, you may be able to buy a rider that will make allowance for your business. This option may cost you less than taking out a separate business insurance policy. Once your business expands, then meet your business insurance needs separately. Clearly explain to your insurer what your business is about and discuss with her the type of insurance coverage you may need.

Use Licenses

Operating a business from home may not absolve you from licensing. Your attorney will discuss with you what legal requirements for operating a business from your home are in place. For starters, if you sell products, your state may require you to collect sales tax and forward same to the state government. If you run a certain type of business, such as a nail salon, you may be required to show proof of state licensing.

Your local government may require you to obtain a use license, effectively permitting you to operate a business from your home. Your town or county may require this while your state may demand that you send in an annual report and pay a fee. Never operate a business off the books — it takes just one informant to expose your business and put your enterprise in jeopardy.

Attorney Review

Certainly, it always good to run your business idea by your attorney. What may on the surface seem like a legitimate and entirely plausible idea, can quickly cause you to run afoul of the law if not planned out with care. Stay within the legal graces of the powers that be and your enterprise can be run smoothly and profitably.

Author Information

This post was provided by Frank Roberts on behalf of Swope Rodante, P.A., a law firm specializing in cases involving personal injury, product liability, and insurance law.

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