Are you the employed or self-employed type? What’s your retirement plan? What type of business do you find feasible? Research shows that 70% of people start businesses to be their source of income when they retire. Also, 70% of people prefer self-employment to being employed by someone else. It is important to note that before you start any business, there are things you need. These include but not limited to legal requirements and capital.
Many people love to succeed in business verbally. It is easier said than done. What makes your business susceptible to failure? The main reason is having the business to be led by a person who is inexperienced and knows nothing about legal requirements.
Before starting up a business, you need to thoroughly prepare yourself first. Do not jump into a very competitive marketplace without researching well regarding their authorized bases. Having stumbled upon this article, Write my essay has explained, in details, 6 legal requirements for starting a small business and the consequences associated with evading these concerns.
1. Business structure
Having a business structure guides you on how to plan your business. What are your aims? Are you providing goods or services? Are you a solopreneur or do you want to hire employees? What are the present financial requirements and what capital do you have? Different people have different needs for their business.
To determine the structure of your business, you can consider the following options.
i. Limited Liability Company (LLC)
LLC structure is popular for its simplicity, yet it has strong legal protections hence shields your personal assets. It was originally designed to protect business owners from business-related liabilities. An LLC also combines the formation benefits of a corporation and the tax benefits of a sole proprietorship. A business should have an LLC Operating Agreement to receive these benefits and protections. These agreements organize the LLC and set forth essential responsibilities and obligations.
ii. Sole proprietor
Many individuals start their businesses as sole proprietors. When it comes to tax, you operate under your Social Security Number. If you do not want to use your Social Security Number, you can apply for a Tax Identification Number. The business will generally operate under your legal name. If you want to register the business under a different name, you will register a Doing Business As to indicate the name you want to allocate to your business.
iii. S Corporation
This is a business structure that has the Subchapter S designation from IRS. With the S Corp structure, you have limited legal liability (separation of your assets from your business) of a different legal corporate body and a separate tax body.
iv. C Corporation
C Corps make business owners to be shareholders. If you are the individual owner of a C Corp, you are not only the owner of the business but also the major shareholder.
2. Business name and registration
You can choose to name your business after you or decide on an alternate name. You will have to register your business as a DBA so that the government knows the name you are operating your business under. Using your preferred name for a business makes it easy for branding purposes. For example, if your name is Zuriel Rayner, the legal name of the business will be Zuriel Rayner. However, if you decide to name your business ‘Zuriel Rayner Services’, you will have to register this as a DBA name.
3. Employer Identification Number
Any business, whether a corporation, partnership or has employees, should have an Employer Identification Number. An EIN, just like a Social Security Number, recognizes your business for tax. This EIN helps you to file tax returns, open business bank accounts and/or apply for business licenses.
If you operate your business as a single member, you do not require and EIN. However, it is good to acquire one so that you can be able to separate business and personal liabilities. Furthermore, it will protect your Social Security Number on business documents and shields you from identity theft cases.
4. Business license and permit
Nowadays, very few general businesses still exist. The modern economy pushes for business specialization. If you want to be specific in your business, you must have a license on board. Permits and licenses vary depending on the location of your business and the type of business industry.
5. Business insurance
The most important lifetime insurance cover (perhaps) for any business is general liability insurance. This insurance guards you from general claims of offenses and keeps your lights on, should you be sued in court. For instance, if a customer accidentally slips on the floor and injures themselves while walking on the aisles of your shop, your general liability insurance will step in to step in should they sue you. In the same way, if you have a defective item on the shelves and it happens to harm the user, the general liability insurance will protect you. Your business will not have to close so as to rework on the whole manufacturing and logistics processes.
If your business has other workers, ensure that the insured. These may include giving workers’ compensation insurance to those who get injured at the place of work and cannot provide for themselves. Small business owners tend to avoid insuring their workers in order to cut down costs associated with insuring them. You ought to understand that skimping out their insurance may cost you dearly, should it fail.
Some small businesses may be exempted from workers’ insurances depending on the nature of the business and number of employees. However, as the business expands, you will have to think about your workers.
6. Tax payments
Tax payment is not something that you can easily shrug off. Once your business name is permitted and you have attained licenses and insurances, it’s time to get down to business. However, before kick-starting, you have to address the issue of tax payment. All you want is to avoid the shame of having revenue tax service providers knocking on your door. Apply for the Employer Identification Number (EIN) online. After acquiring the EIN, you are now ready to get started. This will help the government to differentiate your business from others at the time they will be collecting what you owe them.
Having read all the 6 legal requirements for starting a small business, it is time to dive in and put that business in action. Save that penny for your retirement period!