Legal Steps to Starting Your Own Business

Becoming an entrepreneur is an exciting step. And while many individuals have the drive and passion to go into business for themselves, some do not have a clear idea of all the steps that must be taken to make it happen. Sure, the legal stuff tends to be boring and mundane, but if you ignore it, you will not be set up correctly, and you will not be in business for long. Sell a Business

There are some important legal steps that must be taken when you start your own business. Here are five of them:

Select a Name for Your Business: Your name is critical, because this will be your brand, and the way you represent yourself to the public. Your name should effectively encompass what you do, and be something people will easily remember. Once you have decided what to name yourself, you need to make sure you can use it.

First, check with the Secretary of State’s office in your state to find out if the name is available. Next, double-check with the U.S. Patent and Trademark Office and make sure someone has not trademarked the name. Finally, check with a domain name provider to find out what online URL might be available. Ideally, you want a .com extension, but if the name is right and you are legally allowed to use it, you may be willing to look at a .net, .biz, or another domain extension.

Select and Form the Proper Entity: Once you have decided on the name you will use, it is time to make it official. This is done by setting up a business structure and registering the name. There are several entities to choose from. The simplest way to start is with a sole proprietorship or partnership. In the long run, however, your goal should be to set up an entity that will provide more legal protection for you, the owner.

Limited Liability Companies (LLCs) are often recommended, because work well for both smaller and larger businesses. Corporations have some advantages as well. The right entity for you will depend on the specific business and industry you are in, and how large you plan to grow. As always, do your due diligence and consult with a professional for more detailed guidance.

Apply for a Business Tax ID Number: If you are a sole proprietor or partnership, you can skip this step for now. With these entities, you can use your Social Security number for all business filings. If you opted to set up a corporation or LLC, you should apply for a federal tax identification number (EIN). Most states also require a tax ID number, especially if you are performing taxable services in that state. It is important to note that many banks also require you to have an EIN to open a business account, which you will want to have if you plan on operating a serious business. For this reason, you may want to apply for an EIN even if you choose not to form a corporation or LLC right away.

Secure all Licenses, Permits and other Requirements: Depending on the type of business you are starting and the area in which you plan to do business, there is a good chance you will need to apply for some licenses, permits, and fulfill other compliance requirements. For example, if you are starting an accounting firm, you will need to be a licensed CPA, and your firm will most likely need a public accountancy license as well.

Take Out the Necessary Insurance Policies: A business loss can be catastrophic, especially if you are not properly insured. There are several types of insurance policies business owners should consider, depending on the type of business and industry. Some of the most common include business owner’s policies (BOPs), professional liability insurance (a.k.a. errors and omission insurance), life insurance for you and any key employees, and in recent years, cyber/data breach insurance is quickly becoming a necessity.

Starting a business involves several legal steps which must be performed properly to get the business off the ground. One way to side-step this process is to look for an existing business for sale. Purchasing an existing business offers several potential advantages for those who have the available funding. To learn more about this option, speak with a reputable business broker; and preferably, a broker that has experience with business transactions in your industry.

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