Starting a business is an exciting venture, but it also comes with a set of legal requirements that must be met to ensure compliance with local, state, and federal laws. Understanding these requirements is crucial for any aspiring entrepreneur. This article outlines the essential legal steps to take when starting sell a small business (squareup.com) business, covering everything from business structure to licensing and permits.

1. Choose Your Business Structure

One of the first decisions you will make when starting a business is choosing its legal structure. The most common types of business structures include:

• Sole Proprietorship: A simple structure where one individual owns and operates the business. It is easy to set up but offers no personal liability protection.


• Partnership: Involves two or more individuals who share ownership. Partnerships can be general or limited, each with different levels of liability and management responsibilities.


• Limited Liability Company (LLC): Combines the benefits of a corporation and a partnership. Owners have limited liability for business debts while enjoying pass-through taxation.


• Corporation: A more complex structure that is legally separate from its owners. Corporations offer limited liability but require more regulatory compliance and formalities.

Choosing the right structure affects your taxes, liability, and the amount of paperwork required.

2. Register Your Business Name

Once you have chosen a business structure, you need to select and register your business name. This step is crucial for establishing your brand identity and protecting your business. Here are the key points to consider:

• Choose a Unique Name: Ensure that your business name is not already in use by another entity. Conduct a search through your state’s business registry and the U.S. Patent and Trademark Office (USPTO) for trademarks.


• Register the Name: Depending on your business structure, you may need to register your business name with your state. This is typically required for partnerships and corporations but may not be necessary for sole proprietorships.


• Consider a DBA: If you plan to operate under a name different from your legal business name, you may need to file for a "Doing Business As" (DBA) name.

3. Obtain Necessary Licenses and Permits

Most businesses require licenses and permits to operate legally. The specific requirements vary by industry and location. Here are some common licenses you may need:

• Business License: A general license to operate your business in your city or county.


• Professional Licenses: Required for certain professions such as healthcare, law, and finance.


• Health and Safety Permits: Necessary for businesses that handle food, health services, or hazardous materials.


• Zoning Permits: Required if you are operating a business from a specific location, ensuring you comply with local zoning laws.

Check with local, state, and federal agencies to determine the licenses and permits required for your specific business.

4. Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a unique identifier assigned by the IRS for tax purposes. It is essential for businesses with employees, and it is also required for certain types of business structures, such as corporations and partnerships. Here’s how to obtain an EIN:

• Apply Online: You can apply for an EIN through the IRS website. The process is free and usually takes just a few minutes.


• Use Your EIN for Tax Purposes: You will need your EIN for filing taxes, opening a business bank account, and applying for business licenses.

5. Set Up a Business Bank Account

Separating your personal and business finances is crucial for legal protection and financial management. Open a business bank account to keep your business income and expenses distinct from your personal finances. Here are some tips:

• Choose the Right Bank: Look for a bank that offers favorable terms for business accounts, such as low fees and good customer service.


• Maintain Accurate Records: Use your business account for all transactions related to your business to simplify bookkeeping and tax preparation.

6. Understand Employment Laws

If you plan to hire employees, it’s essential to understand the legal requirements associated with employment. This includes:

• Labor Laws: Familiarize yourself with federal and state labor laws, including minimum wage, overtime, and workplace safety regulations.


• Employee Classification: Determine whether your workers are employees or independent contractors, as this affects tax obligations and benefits.


• Workers’ Compensation Insurance: Most states require businesses with employees to carry workers’ compensation insurance to cover work-related injuries.

Conclusion

Starting a business involves navigating a complex web of legal requirements. By understanding the necessary steps—from choosing a business structure to obtaining licenses and understanding employment laws—you can set your business up for success. Always consult with a legal professional or business advisor to ensure compliance with all applicable laws and regulations. Taking these steps will help you build a solid foundation for your new venture, allowing you to focus on what you do best: running your business.