Starting a business can be an exciting and stressful experience at the same time. But with proper planning and legal guidance, the process can be smooth and problem-free. Whenever you begin any business venture, ensure you comply with the legal obligations of the state. There are many legal requirements for a new business and startups, such as tax obligations, financial regulations, and employment laws. Ensure your company meets all these legal requirements so that you focus on growing your new business. Here are three steps to take when forming a new business.
1. Apply for a Tax Number
Applying for a federal tax identification number helps you in various ways. Employer Identification Number (EIN) also grants you legal rights to employ people, pay federal taxes, open business bank accounts, and apply for business licenses. If you plan to do the above, applying for the EIN is very important and will help you not fall to the wrong side of the law.
If your business operates as cooperation or a partnership, you are required to have an EIN. But if your business functions as a single-member or sole proprietorship, you are not required to have an EIN, though having one will help you separate your business and personal liability. This shields your social security number on the business documents and offers protection from identity theft. An EIN identifies your business tax purposes as a social security number for your business.
2. Obtain a Business Permit and License
A regulated business that is supervised by the state is required to have federal licenses and permits. The licenses vary depending on the location of your business. Based on your industrial location, you may need licenses from all federal levels. From the local level to the state level, the independent private business should obtain proper permits and licenses.
These licenses allow your business to legally operate within the jurisdiction of the municipal or state you pay the dues to. It is worthy to note that the specific licenses you need depend on the industry your work in. Usually, obtaining a state license or permit and fees depends on your location and your business activities. Failure to obtain licenses and permits results in hefty fines and penalties.
3. Create an LLC and Register Business Name
Creating an LLC is very important if you are starting a new business. LLC stands for Limited Liability Company which offers protection to your business against certain business liabilities. The structure has become popular due to its independence and simplicity. It has solid legal protections which protect your assets.
If you haven’t registered your business name, you can use your personal name. If your business will be online or operating nationwide, you need your name to be trademarked. Incorporated business names offer protection for your business name if every state the name hasn’t been registered. Trademarking isn’t necessary but if you want to pursue it, make sure you have a unique name country-wide.
When embarking on a new business venture, you will have detailed forms, reports, and legalities to work through to be compliant with the state. You need to be conversant with some, if not all. The above are the most important legal steps you need before you start your new business startup. As you proceed with starting the business, make sure you satisfy all legal requirements of the relevant authorities.