Six legal factors to take into account when launching a business
When beginning a new firm, you should take into account a number of legal factors. Some are fundamental necessities that you must attend to or you risk losing your company. While some are optional, others might help you protect your assets and limit liabilities. Here are a few of the most crucial considerations.
1. Choose a business structure
Selecting a business structure is the first step in starting a new enterprise. Your company is lawfully constituted in this manner.
In most cases, a sole proprietorship is what you have if you just establish your own business. Most of the time, you can file your business taxes along with your personal tax return without any official paperwork. Similar to a sole proprietorship, a partnership is when you launch your company alongside at least one other co-owner.
You may receive liability protection by establishing an LLC or company. An LLC or corporation often cannot lose more money than the assets of the company if it cannot pay its debts or is sued. When something goes wrong with the company, the owner(s) of an LLC or corporation rarely have to worry about losing their home or other personal assets. You’ll have to complete a little extra paperwork and adhere to some annual administrative requirements, but the added piece of mind is typically well worth it.
2. Trademark your logo and name
You don’t want someone else to use your wonderful business name if you came up with it. You want clients to think of you when they hear your name rather than getting lost and visiting a rival.
You do have some rights to your name when you first establish a firm, but trademark registration can offer you more security. If you don’t register your trademark, for instance, a company in a different state or industry may be able to start using your name. If you file a lawsuit to block them from using your name, the judge might conclude that there is no risk of consumer confusion since they are not operating in the same industry as you or are located far from you.
You have control over whether and under what circumstances others may use your company name after you properly trademark it.
Logos are comparable to company names. You should submit an application for a logo trademark to ensure that nobody else can use your logo or something really close to it. By registering your logo as a trademark, you prevent others from using it. Additionally, it grants you the authority to file a lawsuit against anyone who misappropriates your trademark.
3. Check for relevant business licenses and permits
You will frequently need to obtain licenses and permits before starting a firm. Sometimes, such as for a doctor or lawyer, you need a specialized license to demonstrate your education and training. Licenses can occasionally be scarce, such as liquor permits in some regions.
In addition, the license can have anything to do with your facility itself rather than the work you undertake. To prove that it is safe for clients to access your establishment, you could need a permission. In rare circumstances, you might need to arrange an inspection before you can welcome customers. There may be unique license and permit requirements for each state, city, and county. Every level of government where you intend to conduct business should be contacted.
4. Consult a CPA and conduct proper bookkeeping
It’s typically a good idea to make an appointment with a CPA before you launch a new company. More than just filing your yearly tax return is what CPAs do.
They may offer suggestions for actions you might take to expand your eligibility for business deductions or boost your company’s profitability. You might not be familiar with the accounting regulations you must abide by or details like whether and how to collect sales tax. To make sure you have everything covered, your CPA will quiz you about your company. You can also enquire about anything .Furthermore, good bookkeeping is crucial. For tax purposes and in case you ever need to apply for a business loan, you must accurately record your revenue and spending. You can setup a bookkeeping system with the aid of your CPA.
5. Open a separate business bank account
If you decide to open a corporation, LLC, or partnership, you may need to have a separate business bank account by law. That’s because your business is a legally separate entity from you, so you need to keep the business’s money separate from your personal money. Even if you’re a sole proprietor, it’s still a good idea to have a separate business bank account.
A separate business bank account does several things. First, it makes your accounting and bookkeeping easier since you don’t need to worry about separating personal and business transactions. Second, it can make a tax audit or lender’s review easier since they won’t have to question which transactions are for your business. Finally, it makes managing your money easier since you know that all the money in your business account can be used for your business and doesn’t need to cover personal expenses.
Many banks offer completely free business checking accounts to small businesses. Some have no requirements, while others might require a minimum balance or amount of transactions per month.
6. Consider purchasing insurance
Smart business owners typically purchase insurance as well. You are shielded from a wide range of potential losses by insurance. Without insurance, you might be forced to sell off business assets, invest more of your own funds than you intended to, or spend money you had planned to utilize for business expansion to cover unexpected disaster costs.
There are numerous varieties of insurance coverage.
If you accidently harm someone or damage property, your commercial general liability insurance will protect you.
Your company’s property is protected from hazards like fires and theft by commercial property insurance.
The same way that personal auto insurance protects your vehicles, commercial auto insurance does too. Even if you currently have personal coverage, you might still need to acquire commercial coverage if you use your own vehicle for work. There are also specialized types of insurance like malpractice insurance, professional liability insurance, product liability insurance, and more. Talk to an insurance agent to find out what types of coverage your business needs.
Conclusion
You probably decide to launch a firm because you have experience in that industry and believe you can outperform current competitors. Smart business entrepreneurs also know to seek professional assistance in fields they are less knowledgeable about. Consult experts in law, accounting, and insurance to ensure that you are not skipping any steps. You’ll better safeguard your company, and you might discover approaches to boost your earnings.
