The Essential Legal Steps Every New Small Business Owner Should Take

The legal side of owning a business is arguably the most important side. If you have an amazing, thriving business, but it is not owned and operated legally, that will do far more harm than good. Having a legally safe business protects not only your business, but also you as a business owner as well. Here we’ll list the most essential legal steps to take when getting your new small business up and running.

The first essential legal steps that every small business owner should take are making sure that their small business is an actual, legally recognized business. To do this, you should register your business.

Choose And Register Your Business Structure

Select your business entity structure. There are several types of business entities to choose from: sole proprietorship, partnership, Limited Liability Company (LLC), and corporations. Sole proprietorships are common amongst freelancers. Additionally, LLCs are a common choice as well because of their ability to protect and separate your personal assets from your business’s liability and finances.

After you select this, you should then register with your state and file any necessary formation documents, such as Articles of Organization. These forms will also include essential information about your business, including your registered address and registered agent.

Additional But Still Essential Next Steps

Included in these essential steps is making sure that your business is tax-compliant. This means obtaining an Employer Identification Number (EIN) and the necessary tax accounts. An EIN number is given out by the IRS and is used for tasks such as hiring employees and opening business bank accounts. If your business is allowed to make tax-deductible purchases, you may need your EIN to verify this with the merchant. It’s important to note that it is not always necessary for a sole proprietorship to have an EIN. 

Lastly, to get started with your business, you must obtain any licenses or permits necessary for whatever your industry may be. For example, if you are selling products, you may need a vending permit. If your business is selling meals, you may need a seller’s permit and a food or alcohol permit.

To figure out which licenses and permits are required for your business, check with your local government.

Consider Protecting Your Work:

Trademarking your business’s name gives you exclusive rights to it in your industry. Patents protect an invention, and copyrights cover original work such as creative content. Trademarking, patents, and copyrights are all needed for different scenarios, but it may be worth considering for a new small business.

Consider NDAs:

If you have confidential company information that you must share with employees, consider enacting Non-Disclosure Agreements (NDAs) for your business workers.

Open A Business Bank Account: 

If your business is established as a sole proprietor, this might not be legally required, but for many freelancers, a separate bank account has been proven useful. For others, this step is crucial for accepting and receiving payment. It separates your business and personal finances with a hard line. It also opens the possibility to apply for credit in the future, even if your small business isn’t quite ready for that yet. Having a potential line of credit available may be helpful in case of a business emergency. Overall, it also adds an air of professionalism to your business. Customers can make checks out directly to your business or pay with credit cards. It also allows you to take work off of your plate with day-to-day banking tasks by allowing you to assign employees these tasks on the business’s behalf. As mentioned before, you’ll need an EIN to open a business bank account.