There are many aspiring entrepreneurs wanting to venture into the business world. However, starting a business is often easier said than done. This makes lack of experience and improper planning the main reasons why businesses fail in their first years of activity.
The business world is much more complex than it may seem from the outside. Besides financial, logistics, and operational factors, business owners also need to take into consideration the legal requirements if they want to prevent potential failures. This includes the legal structure of your business, trademark issues, safety responsibilities, insurance, and licensing.
Sure, there is the possibility to hire someone that will handle all of these aspects for you, but that means more money you need to take out of the company’s pockets. And even if they have an army of people running around, a business owner should at least know some basics about the legal side of their business.
Don’t venture into the world of entrepreneurship without being prepared, or you will have much fewer chances of success. To help you out, below are the most important legal concerns you need to consider when starting a business.
Choosing a legal structure
This is one of the first steps you need to take to open any form of business, and even though is seems to be an overwhelming process, it is necessary for establishing a number of aspects. This decision will affect everything, from the taxes you need to pay, to the methods you can use to raise money and the paperwork you will need to file.
There are multiple options you can choose from, each coming with its own perks and perils. Some examples are:
- Sole proprietorship – the main advantage of a sole proprietorship is the ease of setup and low fees you need to pay, but remember that your personal assets will not be protected in case of debt.
- Partnership – this is another low-cost option, but remember that all partners are responsible for liabilities.
- Corporation – a more complex option, where your company’s legal entity is separated from your individual one. Most common types are C corporations and S corporations.
- Limited Liability Company – put simply, this is a combination of all the aforementioned options, and its purpose is to limit ownership liability. Tax requirements represent the main downfall here.
Obtaining the necessary licenses
Depending on the type of business you do, you may be required to obtain a license before you can open your doors. This is especially important for businesses in the healthcare and legal industry, and malpractice cases can be particularly expensive, so make sure you don’t skip this aspect. There is an entire list of professions that require licensing, so make sure you check with your state and have all the documents in order.
Besides special licensing, all businesses are required to obtain certain permits and licenses in order to operate in a specific state. These permits and licenses are strongly related to the taxes you are going to pay, as well as to determine if your business affects public safety. If, for example, your business has the potential to harm the environment, you will be required to obtain specific permits and licenses.
Avoiding trademark and copyright violations
Trademark and copyright violations should be treated very seriously, as they can bring significant legal troubles. To avoid these issues, make sure you check that the name you have chosen for your business is not already taken. Failing to do so could leave you exposed to receiving a cease and desist letter, which informs you of conducting illegal activity. This could jeopardize your business and ruin your reputation, so there is no reason to let it happen.
If you want to be sure the name of your business is not already taken, take the time to formally register it with the U.S. Patent and Trademark Office. This will ensure no one can come and accuse you of stealing their name or intellectual property.
Finding a registered agent to handle your legal correspondence
Even though every business, except for the self-employed, is required to have a registered agent, no one really talks about it. A registered agent is either an individual or an entity authorized to receive and handle all your federal and state legal documents, such as a subpoena or summons. This makes the registered agent the main point of contact when it comes to legal correspondence for your business.
When you register your business, you have to designate a registered agent on its formation documents, such as the articles of incorporation. Without one, the articles won’t be approved by the secretary of state. When choosing a registered agent, check to see if they have a physical address in the state you are doing business in. For example, if you are doing business in Wyoming, you need a Wyoming registered agent.
You also have the option to be your own registered agent, but you will be required to be open for business and be physically in the office during normal business hours (9 a.m. to 5 p.m.). This means you will be basically pinned to your desk all day, with no time for business meetings and client discussions.
Health and safety responsibilities
It is the duty of any business owner to ensure the safety of their employees, regardless of the size of the business. This is not only a legal responsibility but an ethical one as well, as you will be responsible for every person that works in that facility.
If your business has a brick-and-mortar location, then you will be legally required to register it with the Occupational Safety Health Administration (OSHA). If your employees are exposed to work dangers, such as operating heavy machinery or hazardous materials, then your responsibilities are going to double. You can sign your employees up for osha 10 training to stay compliant.
Trying to bypass the law when it comes to employee health and safety aspects can bring some serious legal implications, so make sure you have everything in order before you begin operations.
