Are you sitting on an idea that you’re sure is a bonafide moneymaker? Maybe it’s time you took the first steps toward making your dreams a profitable reality. But where do you begin?
First and foremost, you need a plan. You need to visualize how your idea will work in the real world and prove to yourself (and any potential investors) that it’s not just a pie in the sky.
There is also a multitude of legal hurdles you’ll have to jump to establish and launch a legal business. If you’re new to the business world, it can be overwhelming to understand and keep track of all associated rules and regulations. Hopefully, this guide will help you navigate the necessary steps to becoming a successful business owner.
Officially Starting Your Business
To legally establish a business, you have to register as a legal entity. You’ll have to decide between becoming a corporation or a limited liability company (LLC). An LLC is typically ideal for small or medium-sized enterprises and is simple to register. More importantly, establishing the business as an LLC exempts you from personal liability should the venture fail. With an LLC, you can still file your business income as part of your personal income as a self-employed individual.
Corporations, on the other hand, are considered completely separate legal entities from their owners or investors. Tax returns for such entities, therefore, need to be filed entirely on their own. In this vein, they also exempt owners from business liability to a greater extent than LLCs. The downside of registering as a corporation is the cost and legal complexity of the process.
The deliverables of the registration process include:
- Business Name: This is a name exclusive to your entity that no other business entity in the state can is allowed to have. If you trademark the name, no other entity in the country can bear the same name. This name can be the basis for your business domain name when you decide to give it an online presence.
- Employer Identification Number: You won’t be able to hire workers legally without this number, as the IRS will use it to keep track of the taxes you remit on their behalf. Your EIN is also used to track other kinds of taxes that businesses are required to pay. You’ll also have to find out whether or not your startup is required to have a state tax ID number.
- Business Permits and Licenses: The required permits and licenses will depend on the nature of your business and its location. Be sure to research all city, state, federal, and industry-related permits that apply to your specific venture. Many business owners hire a lawyer to assist them in this process.
Following Tax Codes
The moment your venture is legally established and tagged with an EIN, you’ll have to start paying business taxes. While the form of business you operate will determine which exact taxes you have to pay, companies generally have to file for:
- Income tax
- Estimated taxes
- Employment taxes or self-employment tax
- Excise tax
Insuring Your Business
Having insurance to cover different forms of loss is essential to every business, no matter the size and scope of their operations. As a business owner, you want to do everything you can to avoid out-of-pocket expenses. Furthermore, many forms of insurance are required by law.
Examples of insurance policies that business must have or commonly choose to purchase include:
- Professional liability insurance
- Property insurance
- Product liability insurance
- Workers’ comp coverage
- Business interruption insurance
- Commercial auto insurance
- Business owner’s policy
Abiding by Employment and Labor Laws
Having a workers’ comp policy is just one of numerous regulations regarding labor. Other compulsory labor laws in the U.S. are set by the Occupational Health and Safety Act, the Fair Labor Standards Act, and Federal Equal Employment Opportunity laws.
Adhering to Environmental Laws
And that’s not all; your company will also need to conform to laws designed to safeguard the environment. The U.S. Environmental Protection Agency is charged with ensuring that businesses dispose of any waste in an environmentally-friendly manner.
Starting a business requires a lot of organization and decision making. While this list should help you get a jump start, it’s not a comprehensive guide to launching a business entity. To ensure that you follow all rules and regulations, you may consider hiring a lawyer outside consultant. That way, you can start your company with a firm foundation and ensure a smooth business launch.